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CO2 Emission Reduction Options For
Coal-fired Electrical Utility Boilers and Other Stationary Sources
September 1, 2004
Second Interim Report Pursuant to Clean Smokestacks Act
Source: CCSP/Meehl
North Carolina
Department of Environment and Natural Resources
Division of Air Quality
The Requirement: Excerpted from the Act
[Title: An Act to Improve Air Quality in the State by Imposing Limits on the Emission of Certain Pollutants from Certain Facilities that Burn Coal to Generate Electricity and to Provide for Recovery by Electric Utilities of the Costs of Achieving Compliance with Those Limits]
SECTION 13. The Division of Air Quality of the Department of Environment and Natural Resources shall study issues related to the development and implementation of standards and plans to implement programs to control emissions of carbon dioxide (CO2) from coal-fired generating units and other stationary sources of air pollution. The Division shall evaluate available control technologies and shall estimate the benefits and costs of alternative strategies to reduce emissions of carbon dioxide (CO2). The Division shall annually report its interim findings and recommendations to the Environmental Management Commission and the Environmental Review Commission beginning 1 September 2003. The Division shall report its final findings and recommendations to the Environmental Management Commission and the Environmental Review Commission no later than 1 September 2005. The costs of implementing any air quality standards and plans to reduce the emission of carbon dioxide (CO2) from coal-fired generating units below the standards in effect on the date this act becomes effective, except to the extent that the emission of carbon dioxide (CO2) is reduced as a result of the reductions in the emissions of oxides of nitrogen (NOx) and sulfur dioxide (SO2) required to achieve the emissions limitations set out in G.S. 143-215.107D, as enacted by Section 1 of this act, shall not be recoverable pursuant to G.S. 62-133.6, as enacted by Section 9 of this act.
GENERAL ASSEMBLY OF NORTH CAROLINA - SESSION 2001 – (SENATE BILL 1078)
Ratified the 19th day of June 2002. (Ch. SL 2002-4 S.13)
Marc Basnight - President Pro Tempore of the Senate
James B. Black - Speaker of the House of Representatives
Michael F. Easley - Governor
CO2 Emission Reduction Options For
Coal-fired Electrical Utility Boilers and Other Stationary Sources
September 2004: Second Interim Report
Pursuant to the Clean Smokestacks Act of 2002
North Carolina
Department of Environment and Natural Resources
Division of Air Quality
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ii
An Invitation from Secretary Ross
TO: Environmental Review Commission
Environmental Management Commission
FROM: William G. Ross, Jr.
DATE: September 1, 2004
SUBJECT: Mercury and CO2 Reports Required by Clean Smokestacks Act
On March 23, 2004, the United States Environmental Protection Agency recognized North Carolina and the Clean Smokestacks Act for outstanding, innovative efforts in improving air quality through regulatory and policy innovations and presented our state with a Clean Air Excellence Award. I had the privilege of saying a few words at the award ceremony in Washington, D.C., on behalf of our state, Governor Easley, and all the other partners who played vital roles in the passage of the law. It was a pleasure for me to describe the story of the Clean Smokestacks Act as a story about the power of innovation, partnerships, teamwork, and leadership.
The act, in addition to providing for major reductions in S02 and NOX emissions from NC’s 14 coal-fired power plants, directed our Division of Air Quality, over a three year period, to study and make recommendations concerning emissions of mercury and carbon dioxide.
As you know, these are important, controversial issues. For example, Donald Kennedy, the Editor of Science, has called climate change “the most serious issue” we face.
Last year, 2003, the Division, working with a broad group of interested parties, put together reports reviewing and summarizing the state of scientific research on mercury and carbon dioxide emissions. This year, 2004, the Division has updated the review of research, and has inventoried options for the recommendations we must make next year (2005). We now ask all interested parties to read this year’s report and give us their views, questions and suggestions about it.
In the upcoming year, as we consider what to recommend, we will evaluate options for action with a number of criteria and principles in mind. As a starting point for those criteria and principles, we plan to use ones suggested in a report of a November, 2003 Aspen Institute policy dialogue chaired by Eileen Claussen and Robert W. Fri. The title of the report is: A Climate Policy Framework: Balancing Policy and Politics. As adapted for use in the task that the General Assembly has given us, the criteria and principles are as follows: iii
1. Environmental effectiveness: How effective is the option in meeting its environmental and public health and welfare target, whether that target is public awareness, information collection and evaluation, or emission reduction?
2. Cost effectiveness: Will the option design allow cost-effective compliance? How will it affect the ability of business to compete?
3. Administrative feasibility: Can the option be administered and does it minimize administrative and transaction costs?
4. Distributional equity: Is the burden of compliance with the option fairly
apportioned?
5. Political acceptability: Are there elements of option design that affect its
political acceptability?
6. Technology development and diffusion: Will the option help provide a platform for technology development and diffusion?
7. Adaptability: Will the option be able to adapt to changing circumstances and incorporate new information?
8. Monitoring and counting: Will the option include things that can be monitored and are verifiable?
9. Encouraging long term success: Will the option encourage long-term progress and success?
As I mentioned above, we invite your input with respect to whether these are the appropriate criteria and principles and how the various options for recommendations come out when judged against the appropriate criteria and principles. Also, we invite you to suggest options that are not in our inventory and to tell us why such options should be considered.
In the interest of giving every citizen of our State, now and in the future, a reasonable opportunity to live a happy, healthy, and prosperous life, we solicit your input and appreciate your help.
iv
Preface
The North Carolina Clean Smokestacks Act (CSA), Session Law 2002-4 (aka Senate Bill 1078), was passed and signed into law in June 2002. This Act’s primary requirements established reductions of SO2 and NOx emissions from coal-fired power plants within the State. There were also two sections of the Act which require the Division of Air Quality (DAQ) to provide reports to the Environmental Management Commission (EMC) and the Environmental Review Commission (ERC) by September of 2003, 2004 and 2005, regarding the effects of these controls on mercury and CO2 emissions. These sections also require DAQ to study and make recommendations to these bodies regarding any further actions needed for these two substances. The first reports (first interim) under this requirement were provided in 2003 and are available from DAQ’s web page on the Internet at http://daq.state.nc.us/news/leg/. A summary of some of the main findings of that report follows this page.
The information in this Second Interim Report on CO2 supplements and updates the information in the September 2003 report and attempts to define a range of options for future consideration (and should not be considered recommendations). Recommendations from DAQ will be addressed in the September 2005 report. The DAQ will continue the stakeholder process through the preparation of that final (September 2005) report. It continues to solicit input from stakeholders and all comments will be seriously considered. However, DAQ recognizes that it is responsible for all final recommendations, and reserves the rights to include, exclude, or revise the final documents to reflect its best judgment of facts, science and objectivity.
DAQ held a public workshop April 19-21, 2004 as a means of soliciting the latest available information, providing a forum for their discussion among stakeholders and others, and to generally exchange ideas on both CO2 and mercury. A wide variety of speakers, many of whom are leading experts in their field, provided presentations. The presentation slides of the main points are provided on DAQ’s web page and listed in Appendix A of this report. To view them, go to: http://daq.state.nc.us/news/leg/cleanst_hg_co_prov.shtml on your web browser and this will link you to those resentations. DAQ recognizes each of these speakers for their work and expresses its appreciation to each of them for their time and efforts to make these presentations and share their expertise.
Please note that in a few cases, text from some public domain (government) references may be repeated verbatim in this report for efficiency, expediency and accuracy. These situations are indicated. The intent is to give proper credit and use only public (copyright unrestricted) sources in these instances. If any errors or deviations to this intent are found, please immediately bring these situations to the attention of the authors. It is not the intent of the authors or DAQ to take credit for the work of others or disregard copyrights.
The authors and editors of this report express their gratitude for all contributors, stakeholders, reviewers and other interested parties who made it possible to produce this work.
v
Selected Conclusion Statements Extracted From First Interim Report
(See 2003 Report for further details at http://daq.state.nc.us/news/leg/ ) 1
• Leading national and international science and governmental authorities, including the current administration, have concluded that man-made emissions contribute to climate change and that it is prudent to take rapid steps to reduce those emissions. The Bush Administration’s “US Climate Action Report 2002”2 accepts and supports the conclusions of the NAS report alluded to above.
• Despite the strong and growing scientific consensus, many still debate the severity of impacts from increased GHG, including CO23, and what should be done in response to rising GHG levels.
• Climate change is a concern at all levels, from local to global, and must be addressed at local, state, regional, national and international levels, with coordinated leadership.
• Options for reducing GHG emissions include conservation, process changes, development and adoption of new technologies and other approaches at all levels of society.
• CO2 is only one of several (usually identified as five major4) greenhouse gases that affect the climate, but the CSA could be interpreted to only address CO2.
• The emissions of CO2 in North Carolina from known sources have been quantified by multiple studies. These studies provide data that are acceptable for purposes of problem assessment. However, for emission trading purposes, the protocols and documentation standards required may cause these estimates to be less than fully adequate.
Other energy savings programs exist that contribute, or have the potential to contribute, to the reduction of GHG emissions. For example, the proposed NC Energy Plan is closely aligned and based on similar principles and objectives.
• Currently, substantial reductions in emissions of CO2 are expected to come from energy efficiency improvements and other measures to reduce fuel consumption, as identified in the State Energy Plan.
• The recognized most effective way to “control” CO2 is to reduce or refrain from burning of carbon-based fuels.
• Scrubbers that control or reduce NOx or SO2 emissions are not effective in significantly reducing CO2 and
• Several DOE (and other) research projects aim to
o increase efficiency of utility boilers
o capture/sequester CO2 from stacks, and
o control these gases by new and innovative methods (such as injection of captured stack effluent into deep underground coal seams or brine pools).
However, these have not yet been proven fully successful or economically viable.
1 North Carolina Division of Air Quality, DENR, CO2 Emission Reduction Options for Coal-fired Electrical Utility boilers and Other Stationary Sources, First Interim Report, September 2003.
2 Climate Action Report, http://yosemite.epa.gov/oar/globalwarming.nsf/content/ResourceCenterPublicationsUSClimateActionReport.html, US Department of State, Washington, DC, May 2002.
3 Status of the Kyoto Protocol; The United Nations Framework Convention on Climate Change, July 2003.
4, US DOE, Energy Information Administration, Washington, DC ,Emissions of Greenhouse Gases in the United States 2001, DOE/EIA-0573, December 2002. vi
Acronyms Used in This Report
AEFL - Amine-Enhanced Flue Lean Gas Reburn
CAA – Clean Air Act – Primary federal statute governing clean air requirements
CAFO – Confined Animal Feeding Operation
CAIR – Clean Air Interstate Rule
CAPA – Clean Air Planning Act – Carper Bill
CCAR – California Climate Action Registry
CCSP – Climate Change Science Program
CEM – Continuous Emission Measurement
CHP – Combined Heat and Power
CO2 – Carbon Dioxide – the major global warming gas
CPA – Clean Power Act - Jeffords-Waxman Bill
CSA – North Carolina Clean Smokestacks Act (See inside cover for full text and title)
CSI – Clear Skies Initiative (or Act) – Proposal for revised CAA legislation by the Bush Administration (also recently referred to as synonymous with the CAIR)
DAQ – North Carolina Division of Air Quality
DENR – NC Department of Environment and Natural Resources
DOA – Department of Agriculture (US or NC)
DOE – The US Department of Energy
EPC – Energy Policy Council
EMC – Environmental Management Commission (NC)
EPICI – Electric Power Industry Climate Initiative
ERC – Environmental Review Commission (NC)
EPA – US Environmental Protection Agency
GHG – Greenhouse Gas(es)
GWP – Global Warming Potential
HFC’s - Hydroflurocarbons
HVAC – High Volume Air Conditioning
IGCC – Integrated Gasification Combined Cycle
IPCC - Intergovernmental Panel on Climate Change, international authority on climate change
kWh – Kilowatt hour (1000 watts for one hour)
LNB – Low NOx Burner
LoGESO – Local Government Energy Savings Organization
NAAQS – National Ambient Air Quality Standards
NAS - National Academy of Science
NASA – National Air and Space Administration
NASEO – National Association of State Energy Officials
NC – North Carolina
NCCA – North Carolina Climate Action (Registry)
NCSU – North Carolina State University
NESCAUM - Northeast States for Coordinated Air Use Management
NHCPS – New Hampshire Clean Power Strategy
NSF – National Science Foundation
MOU – Memorandum of Understanding
vii
MW – Mega-watt; millions of watts
NOAA – National Aeronautics and Space Administration
NOx – Oxides of Nitrogen, including NO2, the primary nitrogen species from combustion
OFA – Overfire Air
PFC’s - Perfluorocarbons
PTC – Production Tax credit
RGGI – Regional Greenhouse Gas Initiative (NESCAUM)
ROFA – Rotating Opposed-Fired Air
ROTAMIX – Injection of Ammonia to further reduce NOx (Used in combination with ROFA)
RPS – Renewable Portfolio Standard
SCR – Selective Catalytic Reduction
SCRUB – Wet scrubber for SOx
SEO – State Energy Office of NC
SEP – State Energy Plan of NC
SNCR – Selective Non-Catalytic Reduction
SO2 – Sulfur Dioxide
SOx – Oxides of Sulfur, including SO2, the primary combustion product of sulfur
SUV – Sport Utility Vehicle
TFS2000 – Combination Low-NOx Burner/Overfire Air
tpd – tons per day
UNFCCC - United Nations Framework Convention on Climate Change
WIR - Underfire Air viii
Table of Contents
The Requirement: Excerpted from the Act..................................................................i
An Invitation from Secretary Ross............................................................................iii
Preface........................................................................................................................v
Selected Conclusion Statements Extracted From First Interim Report.................vi
Acronyms Used in This Report.................................................................................vii
Chapter I Executive Summary................................................................................I-1
Introduction...............................................................................................................I-1
Main Findings in This Second(2004) Interim Report:..............................................I-1
Potential Option Levels for Satisfying the CSA Requirements................................I-3
Some Candidate Actions to Achieve the Major Options Outlined Above:..........I-4
Chapter II Background - North Carolina’s CSA And Climate Change............II-1
Pollutant Definitions and Other Terminology........................................................II-1
Review of Concerns About Global Warming and Climate Change.......................II-2
Review of Sources of CO in the U.S. and in North Carolina2................................II-4
Weather and Climate Trends in the Southeast....................................................II-9
North Carolina Climate and Perspectives...........................................................II-9
Chapter III Impacts And Economics of Climate Change..................................III-1
A Backdrop of Growth in Southeastern States......................................................III-1
Projected Climate Change Impacts........................................................................III-1
Potential Economic Impacts Associated with Climate Inaction............................III-2
Weather-related Stresses on Human Populations..............................................III-3
Climate Change Effects Projected for Southeastern Forests.............................III-4
Background on Emissions Trading Programs........................................................III-4
The Currency of a Carbon Market: Carbon Credit$..........................................III-5
Potential Cost Scenarios....................................................................................III-6
Chapter IV Reduction and Sequestration Technologies and Options...............IV-1
Energy Efficiency : Use Less - The State Energy Plan.........................................IV-3
Programs to Directly Increase Energy Efficiency at Generation Units.............IV-4
State Agencies, Local Governments, Schools & NPOs.....................................IV-4
Commercial/Industrial.......................................................................................IV-5
Residential..........................................................................................................IV-6
Renewable Energy (Substitution for Fossil Fuels – Also Addressed in SEP).......IV-7
Solar:..................................................................................................................IV-7
Wind/Substitution..............................................................................................IV-8
Hydroelectric/Substitution.................................................................................IV-9
Biomass Burning/Substitution.........................................................................IV-10
Capture and Use of Underutilized Energy Sources/Substitution.....................IV-12
Post-Emission Capture and Sequestration...........................................................IV-13
Agricultural and Forest Sequestration.............................................................IV-13
Carbon Storage Trends for North Carolina’s Forests:.............................IV-14
ix
Complexity of Carbon Sequestration.......................................................IV-14
Recent Developments in Georgia and California....................................IV-16
Creating an Effective Carbon Storage and Sequestration Program.........IV-17
End-of-Pipe Hardware/Technologies...................................................................IV-18
CO Capture Options2.......................................................................................IV-18
Conventional Amine Absorption.............................................................IV-18
Advanced Amine Absorption..................................................................IV-19
Gas Separation Membranes.....................................................................IV-19
Temperature Swing Adsorption...............................................................IV-19
Regenerable CO Sorbents2.......................................................................IV-19
Geological Sequestration.................................................................................IV-20
Other Technologies and Emerging Options.........................................................IV-21
Conversion of Coal Units to Gas Units............................................................IV-21
Coal Gasification.............................................................................................IV-21
Environmental Benefits of Gasification...................................................IV-22
Efficiency Benefits...................................................................................IV-23
Carbon Capture........................................................................................IV-24
Combined Cycle Turbines...............................................................................IV-24
Distributed Generation.....................................................................................IV-24
Hydrogen Fuels & Fuel Cells..........................................................................IV-25
Recovery of Fuel Value from Animal Waste at CAFOs.................................IV-26
Nuclear Power..................................................................................................IV-27
Industrial Initiatives.............................................................................................IV-27
Other Potential Policy Options for North Carolina..............................................IV-28
Renewables Portfolio Standards:.....................................................................IV-28
Net-Metering....................................................................................................IV-29
NC Climate Action Registry............................................................................IV-30
Chapter V What Are Others Doing.......................................................................V-1
Update on International Developments..................................................................V-1
Federal Actions and Status......................................................................................V-1
State and Regional Activities..................................................................................V-3
Option for Joint Actions Harmonizing With Other States......................................V-4
APPENDIX A April 19-21, 2004 DAQ Workshop Presentations (CO Only) Titles, Speaker Names and Affiliation2.......................................................................................A-1
Monday, April 19 Opening Session........................................................................A-1
Basis for Issues to be Discussed: CO 2 and Mercury:........................................A-1
Lunch Speaker - Importance and Impacts of CSA Sections 12 and 13 and Your Input for the Future of North Carolina: Secretary William (Bill) Ross, NC Department of Environmental and Natural Resources.......................................A-1
Tuesday, April 20....................................................................................................A-1
Lunch Speakers...................................................................................................A-1
Mercury and COEmissions from the Power Generation Sector : Dr. C.V. Mathai, Manager for Environmental Policy, Arizona Public Service Company, Phoenix, AZ2 ...............................................................................A-1
x
Insights from Economic Analyses of the Impacts to the Utility Industry from Mercury and COControls: Dr. Anne E. Smith, Vice President, Charles River Associates, Washington, DC2 ...............................................A-1
General CO Topics and Issues:2.........................................................................A-1
Wednesday, April 21 : NC Specific CO 2 Topics and Issues–...........................A-2
Lunch speaker – Herding Sheep: The Commons and the Marketplace; Michael Shore, Environmental Defense...........................................................................A-2
Summaries:.................................................................................................A-3
APPENDIX B Summary of Recent International, Federal, Regional, State and Local Actions Related to Climate Change................................................................................B-1
International Actions, Treaties and Negotiations:..................................................B-1
Framework Convention on Climate Change (Rio Climate Treaty)....................B-1
Kyoto Protocol....................................................................................................B-1
G-8 Renewable Energy Initiative........................................................................B-2
Small Island States Clean Energy Initiative........................................................B-2
Iceland's Effort to Become First Hydrogen Based National Economy..............B-2
Federal Actions from the 108 Congress Relative to Climate ChangeTH.................B-3
Greenhouse Gas Reduction.................................................................................B-4
Greenhouse Gas Reporting.................................................................................B-4
International Negotiations...................................................................................B-5
Energy Policy......................................................................................................B-6
Appropriations....................................................................................................B-7
Power Plants........................................................................................................B-8
Transportation.....................................................................................................B-9
Hydrogen...........................................................................................................B-10
Clean Coal.........................................................................................................B-10
Carbon Sequestration, Genomes.......................................................................B-11
Climate Science................................................................................................B-11
State, Regional, Local and Private........................................................................B-12
Regional Activities............................................................................................B-12
State Legislation and Programs........................................................................B-12
City and Community Efforts and Commitments:.............................................B-13
Private and Corporate Targets and Achievements:...............................................B-14
APPENDIX C Draft Plan for A North Carolina Climate Action Registry....................C-1
Background.............................................................................................................C-1
Summary of NC and Federal Historical Activities.............................................C-1
Sources and Emissions in North Carolina..........................................................C-2
U.S. DOE and U.S. EPA Registries and Related Programs...............................C-3
US DOE 1605 (b)........................................................................................C-3
US EPA Climate Leaders............................................................................C-4
EPA’s Acid Rain Reporting........................................................................C-4
Climate Wise in NC....................................................................................C-5
Climate Leaders in NC................................................................................C-5
Climate Vision in NC..................................................................................C-6
xi
Environmental Performance Track.............................................................C-6
NC Environmental Stewardship Initiative..................................................C-6
State Energy Plan Interfaces.......................................................................C-7
Previous NC Legislative Involvement and Analysis of Proposals.....................C-7
Range of DAQ Options and Concerns/Issues for Planning a NC Registry............C-8
Overview/Introduction................................................................................C-8
Basis for Program to Fit Needs/Requirements............................................C-9
Options Assessed......................................................................................C-10
Minimal Effort-Low Benefit.................................................................C-10
Intermediate Commitment Option – Limited Benefits.........................C-10
Major Stand-alone Program – High Costs but Higher Benefits...........C-11
A Sensible Skeleton for Building a NC Registry..................................................C-13
Element 1: Encourage Interfaces with DOE, EPA and Other agencies.............C-13
Element 2: Informal “Registration” of GHG via Existing Procedures.............C-13
Element 3: A Program to Encourage and Facilitate Voluntary Reporting.......C-14
Element 4: Harmony With State/Regional/Federal/International Aspects.......C-15
Environmental Stewardship Initiative.......................................................C-15
Continue Support and Participation for Existing State/Federal ProgramsC-15
Joint DAQ Efforts With DPPEA and other State Offices in NC..............C-15
Coordination and Harmonization with State Energy Plan Objectives......C-16
Promotion/Assistance & Education Efforts..............................................C-16
Element 5: Update the GHG emissions inventory for the State.......................C-16
Element 6: NC DAQ Coordination with other (Outside NC) State Programs.C-17
Southeastern States and Other Atlantic/Gulf Coast States.......................C-17
NESCAUM...............................................................................................C-17
California..................................................................................................C-18
Other Legislative Interactions & Expectations Relative to This Proposal...........C-18
Potential Comprehensive GHG Mitigation Plan for North Carolina....................C-18
Summary of Needs for a Practical Level of a Climate Action Registry in NC....C-19
APPENDIX D EPC-Recommended Action Items from the North Carolina State Energy Plan (2003)......................................................................................................................D-1
Energy, Economic, and Environmental Issues.......................................................D-1
Alternative Fuels from Biomass.............................................................................D-1
Alternative Energy Sources....................................................................................D-2
Energy Use in the Public Sector.............................................................................D-2
Energy Use in the Residential Sector......................................................................D-3
List of all 93 action items from the North Carolina State Energy Plan 2003.........D-3
Policies and Programs for Energy and the Environment....................................D-3
Energy Supply Policies and Programs................................................................D-3
Electric Utility Policies and Programs................................................................D-4
Alternative Fuels Policies and Programs................................................................D-4
Alternative and Renewable Energy Policies...........................................................D-5
Public Sector Recommended Policies and Programs.........................................D-6
Residential Energy Policies and Programs.........................................................D-7
Commercial Energy Policies and Programs.......................................................D-9
xii
Industrial Energy Policies and Programs............................................................D-9
Transportation Energy Policies and Programs..................................................D-11
Energy Education and Research Policies and Programs...................................D-12
Funding Energy Policies and Programs............................................................D-14
APPENDIX E Bibliography...........................................................................................E-1
Author Credited Documents (by author’s last name)..............................................E-1
Organizational References (author not specified – by organization name).............E-5
xiii
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xiv
CHAPTER I EXECUTIVE SUMMARY
Introduction
The Clean Smokestacks Act (CSA) was passed and signed into law in June of 2002 by the North Carolina General Assembly and Governor Easley, respectively. This Act requires the Division of Air Quality (DAQ) to complete studies and make specific recommendations to the North Carolina Environmental Management Commission (EMC) and the North Carolina Environmental Review Commission (ERC) by September of 2003, 2004 and 2005 regarding CO2 emissions from coal-fired power plants and other stationary sources. DAQ provided the First Interim Report to these two bodies in September of 2003. This Second Interim Report updates, and expands upon, the information presented in that report and begins to outline options that might be considered for recommendations in the 2005 report. Much of the information presented in this report was gained through additional literature searches and reviews and from information presented in a workshop held with stakeholders, national experts and interested parties in April 2004 (See Appendix A). DAQ continues to be open to new ideas and solicits your continuing input.
This Executive Summary is intended to list and highlight the range of options available from which to develop possible recommendations from which to choose for inclusion in the final report in 2005. This report does not make such choices this time. The process for reaching these decisions will include a continuing stakeholder process, expected to be reconvened in the spring of 2005. The remainder of this report provides additional discussion, details and highlights of options available. The intent is for the reader to use this Executive Summary to identify options and areas that they may wish to explore in more detail in other Chapters.
Main Findings in This Second(2004) Interim Report:
Some main points or findings summarized in this report are:
• According to the EPA, North Carolina ranks 14th among the states in total CO2 emissions.5
• Our state’s CO2 output has grown steadily along with rises in energy consumption, increasing by more than 30 percent since 1990.6
• Currently more than 70 percent of North Carolina’s energy comes from fossil fuels7, and
• Residential energy consumption is expected to increase by about 50 percent by 2020.8
• Other GHG continue to be considered important in addition to CO2.
• “End of Stack” solutions are not viable and practical for removal of CO2 from stacks of power plants or other stationary sources at this time, but may be available over a longer term of several years.
• Costs of inaction to address climate change for North Carolina are projected by scientists and many others to be significant.
5 US EPA, States Ranked By Total Carbon Dioxide Emissions, http://yosemite.epa.gov/globalwarming%5Cghg.nsf/EIAStatesRankedbyTotalEmissionsAll?openview&count=52.
6 US EPA, http://yosemite.epa.gov/oar/globalwarming.nsf/content/EmissionsStateEnergyCO2Inventories.html.
7 Energy Information Administration, Department of Energy, Energy Expenditures in North Carolina, 1999; State Energy Profile, www.eia.doe.gov/emeu/sep/nc/frame.html.
8 North Carolina Energy Division, North Carolina Energy Outlook, 2003, Appendix Table, p. 92. Increase estimated from a 2000 baseline. I-1
• A number of other states continue to take action on climate change in the absence of federal legislation. However, as this document was being finalized, the Bush administration made announcements regarding new affirmation that man’s actions are definitely a part of the global climate change problem and that increased efforts to make reductions are appropriate. This announcement may spur new federal actions.
• There are potential benefits to various sectors of North Carolina’s economy if the State is adequately prepared for the potential carbon marketplace, subject to the timing and structure of national carbon caps.
• There are also significant potential economic paybacks for non-utility sectors of the economy. Investments in development of an infrastructure to reduce carbon combustion (and other GHG equivalents) in other sectors will also help to assure that North Carolina is a leader in development and manufacture of new technologies. In so doing, industry and other institutions can be prepared to provide research, equipment, expertise and services to facilitate these needed changes occurring state-wide, nationally and globally.
• It is likely feasible to take positive actions to develop North Carolina procedures and processes that will result in a climate change registry process whereby the State will become part of a global solution with relatively minor impact upon public resources.
• Efforts and developments in the national, regional state and global arenas continue, (almost daily) and will necessarily influence choices of the next best and sensible steps for North Carolina.
I-2
Potential Option Levels for Satisfying the CSA Requirements
In light of the global and national momentum, and because of the risks and opportunities climate change poses for our state, many are convinced that North Carolina must prepare its economy and its people for a carbon-constrained world. Carbon dioxide and other greenhouse gas (GHG) emissions can be reduced by an array of solutions, including end-of-pipe technologies (now being researched), increased energy efficiency (such as encouraged in the State Energy Plan), greater use of renewable energy, carbon sequestration in trees and agricultural lands and incentives for lower emitting vehicles. Many of these steps can be implemented now. Some may need to be addressed later. Some solutions will likely need to be accomplished by adoption of new governmental policies; some with new State rules based on existing authorities, and others may require new legislation. Policy and legislative changes that are under consideration for the U.S Congress nationally will also likely have important impacts on efforts and steps in North Carolina, especially as needed to avoid redundancy and confusion.
This second interim report examines a wide range of options for reducing our State’s GHG emissions and working with others to reduce the U.S. and global emissions. This report is thus intended to serve as an information source to aid DAQ, and stakeholders in developing recommendations for the North Carolina ERC and the EMC, as required by the CSA. Following submittal of this second interim report, the Division will begin developing an initial draft final report outlining proposed recommendations for North Carolina. That draft report is expected to be ready to begin stakeholder review by Spring 2005. Final revisions of that report, including final recommendations, will then follow by September 2005. The final recommendations will likely be developed from the list of options, or combinations thereof highlighted below, under five main groupings:
A. Take no action and default to potential federal and international actions to address the problem of requiring and defining means to achieve “CO2 controls” (i.e. reductions) at some undetermined time in the future.
B. Commit to future actions, but only after further studies. This option would require the State to first undertake and complete additional studies and pursue more detailed analyses (requires new funding and other resources) involving multiple State agencies and academic institutions to further refine the options and actions.
C. Take a moderately more aggressive approach of accounting and reductions that would be designed with a combination of voluntary and required steps to maximize reductions in GHG, in conjunction with energy efficiency measures that result in a minimum of cost impacts.
D. Develop aggressive plans and take actions to set a cap on all GHG emissions; with reference and focus toward CO2 from coal fired boilers, other stationary sources (combustion-centered, primarily) and transportation sources. This option would involve a significant mandatory reporting and accounting system to would guarantee that North Carolina does its share of leading and attainment of international goals, using established national and internationally accredited protocols and data storage capabilities. I-3
E. A combination of either, or both, of the two previous options, but developed and implemented as part of an integrated multi-state energy and carbon emission reduction (Climate Action) plan.
Some Candidate Actions to Achieve the Major Options Outlined Above:
The items listed below is not necessarily complete, but helps define a range of actions and programs that may be considered for components of the larger overall options outlined above to develop the final recommendations for September 2005:
1. Develop/implement caps for reducing emissions all GHG pollutants (expressed in carbon equivalents) from all major sectors in the State
2. Develop/implement requirements for improved fuel mileage from motor vehicles owned both by the State and by the public
3. Institute a program and target for across the board reductions in use of energy use by State government in North Carolina, with credits for these reductions being quantified and used for possible “cap and trade” programs within the State
4. Initiate a program and policy resulting in an incremental movement toward shifting all electricity purchased by the State government to be through the NC GreenPower renewable resources program
5. Develop and incorporate applicable GHG-friendly policies and requirements in to the State Implementation Plan revisions for ozone and particulate matter (PM 2.5) to the maximum level that is feasible
6. Develop processes and policies to implement new technologies such as IGCC at the earliest possible stage to maximize reductions and maximize efficiencies over the longer term, especially before anticipated replacement of existing power generation capacity in North Carolina
7. Develop/implement a meaningful and detailed emission registration requirement, eventually with third party verification and salable and tradable carbon credits, including strict tracking and accounting of all areas covered by the State Energy Plan, and including consideration for a sector for quantifying natural emissions
8. Develop policies, incentives and systems/programs to encourage complete conversion for using waste from animal operations to its maximum as an energy resource
9. Develop/implement innovative policies that encourage reductions in utility generation and emissions while providing incentives for utility companies to endorse and aggressively assist in achieving such reductions.
10. Maximize the application and effects of the State Energy Plan with tracking of each sector
11. Develop more extensive plans, policies and incentives for use of forest resources for sequestration and for renewable energy (while avoiding double counting)
12. Revisions in net metering limitations and support of passage of new net metering laws
13. Expand study and potential development of renewable and non emitting energy sources and policies related thereto for such categories as:
a. NC GreenPower in both private and government sectors
b. Solar
c. Wind and “geo-power”
d. Bio fuels, etc.
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14. Develop and participate in implementation of significant multi-state energy and carbon emission reduction (Climate Action) plans, involving stakeholder processes where possible
15. Fund and otherwise encourage programs at North Carolina universities to develop energy efficient and carbon-minimized technologies for North Carolina and world markets
16. Aggressively pursue development and nurturing of energy and carbon minimization technology research and manufacturing developments, along with promoting these research programs and manufacturing industries in the state
17. Develop a North Carolina Climate Action Registry that involves mandatory reporting and targets, recognizes existing reporting avenues, and includes reporting by the State sources, all using State guidance and requirements for submittals, but with the DOE 1605 (b) registry being the depository (with a minimal reporting requirement for largest sources only – not geared toward a “State-run” trading system)
18. Develop a basis for an emission credits (trading) program to be administered by private sector resources and motivation
19. Develop further options and plans to integrate IGCC technologies into future planning for energy generation in the state with a future option for geological sequestration
20. Make major recommendations to the North Carolina General Assembly regarding how to potentially alter the utility planning process to allow or provide for earlier input with the earliest possible identification of opportunities for potential encouragement or requirement of new technologies
21. And other similar policies and processes that may be identified.
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If a man will begin with certainties, he shall end in doubts, but if he will be content to begin with doubts, he shall end in certainties. - Sir Frances Bacon
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CHAPTER II BACKGROUND - NORTH CAROLINA’S CSAAND CLIMATE CHANGE
The text of the Clean Smokestacks Act (CSA) Section 13 appears on the inside of the cover page of this report, for convenience. The reader may also wish to review the First Interim Report (September 2003) or the summary on page v of this report, for further background and “state of the science” discussions not repeated in this report.
Pollutant Definitions and Other Terminology
The text of the CSA directs the Division to study CO2, which is by mass or volume, the largest quantity of greenhouse gas (GHG) emitted by coal-fired utilities. It is also the largest effective component of the inventory of GHG emitted from all sources. However, as discussed in the First Interim Report other GHG, such as methane, N2O, halocarbons, and others exist throughout the atmosphere and are contributory to warming of the oceans and Earth’s atmosphere, with substantially more “warming effectiveness” per molecule than CO2. For example, methane is 21 times more “potent” than CO2. Other major contributors to atmospheric warming often overlooked and not addressed in these discussions are water vapor and particulate matter. Recent information provides evidence that “black carbon” particulate matter and nitrogen oxides, such as emitted from diesel vehicles, make significant contributors to climate change.9 The Intergovernmental Panel on Climate Change (IPCC)10 suggests that the effects of one ton of black carbon could equal that of about 200 to 600 tons of carbon dioxide when translated to temperature impacts. Although this document uses other GHG terms in places, the distinct identity and focus on CO2 has also been retained for reference and completeness. Figure II-1 provides a pictorial representation of the relative impact of the various major GHG.
Figure II - 111
9 J. E. Hansen and Miki, Sato. Trends of measured climate forcing agents. Proc. Natl. Acad. Sci. 98, 14778-14783, 2001
10 Intergovernmental Panel on Climate Change, Climate Change 2001: The Scientific Basis, http://www.grida.no/climate/ipcc_tar/wg1/
11 James E. Hansen, Climate Forcings, 1850 – Present, Scientific American, March 2004. II-1
A related terminology question also exists regarding global warming gases, GHG or “climate change gases.” The terms are sometimes used almost interchangeably though there are variations in meaning. [“Climate change” specifically refers to changes in long-term trends in the average climate, such as changes in average temperatures. Depending on usage, it may mean changes due to natural factors and variability, or as a result of human activity. “Global Warming” refers to the progressive gradual rise of the Earth's average surface temperature thought to be caused, in part, by increased concentrations of GHG in the atmosphere.]12 In this document, we use the term “GHG” for convenience, though the more applicable term might be “Climate Change Gases.”
In most sections, the CSA is specifically applicable to coal fired power plants. However, in the language of Section 13, the scope includes “other stationary sources.” Therefore, the scope of this report and study effort is not limited solely to the utility industry and discussions refer to other major sources generating GHG, such as motor vehicles (which, of course, are not stationary).
Review of Concerns About Global Warming and Climate Change
As was stated in the First Interim Report, evidence has been accumulating that the Earth is warming and that this warming is occurring in close parallel to the levels of CO2 in the atmosphere.13. Man made emissions of CO2 have been increasing at a significant rate since the Industrial Revolution when the combustion of fossil fuels and other carbon fuels began to accelerate at a very rapid rate. Recent measurements show that atmospheric concentrations of CO2 have been rising, and continue to rise at a rapid rate. Figure II-2 shows a plot of actual ambient concentrations of CO2 at one of the most representative sites in the world at a high elevation in Hawaii. Similar relationships have been established with levels of CO2 and temperature, as discussed in the First Interim Report.
Internationally, scientists have been discussing the growth of the CO2 and other GHG in the atmosphere for many years and have been drawn into two camps regarding the effects of man made changes to a historic cycle of global warming and cooling. Various international scientific bodies and the National Academy of Sciences have concluded however, that the concerns for the impact of man-made emissions are warranted and that governments must take immediate actions to reduce these emissions. We must consider both the shorter term and the long term impacts of our actions and practices. These concerns and considerations have prompted efforts all over the globe to do something but it has not been well coordinated or orchestrated for these actions to be universal and consistent. It is likely that a leadership role by North Carolina could help make a transition to a more aggressive set of reduction policies and actions, albeit not necessarily focused exclusively on the coal-fired electric power generation units. Even as this document was being prepared for final publication, the President announced additional information and agreement among scientists that man’s role in the climate change phenomenon must be revised and further steps taken to mitigate the
12 The Pew Climate Change Center, Global Warming Basics, http://www.pewclimate.org/global-warming-basics/
13Wiley Barbour, History and Transitions of Global Warming Programs and Policies, Environmental Resources Trust, Inc., NC DAQ CO2 and Mercury Workshop, Raleigh, NC, April 19, 2004 (See Appendix A). II-2
emissions of GHG.14 In addition, new reports out of Europe have also defined more evidence of the changes taking place there and around the globe.15
Figure II-2
Atmospheric CO2 Measurements from Mauna Loa Observatory (Since 1958)
A article by Leonard David, Senior Space Writer with NASA, recently summarized and commented on a National Research Council report: "Abrupt climate changes in the last few thousand years generally have been less severe and affected smaller areas than some of the changes further back in the past. Nonetheless, evidence shows that rapid climate changes have affected societies and ecosystems substantially, especially when the changes that brought persistent droughts occurred in regions with human settlements, there is no reason to believe that abrupt climate changes will not occur again.”16 The NRC report also underscored the importance of not being fatalistic about the threats posed by abrupt climate change. “Societies have faced both gradual and abrupt climate changes for millennia and have learned to adapt through various mechanisms, such as moving indoors, developing irrigation for crops, and migrating away from inhospitable regions." The study group added: "Nevertheless, because climate change is likely to continue and may even accelerate in the coming decades, denying the likelihood or downplaying the relevance of past abrupt changes could be costly. Societies can take steps to face the potential for abrupt climate change."17 Figure II-3 below (also see
14 U.S. Climate Change Science Program, Our Changing Planet; a Report by the Climate Change Science Program and the Subcommittee on Global Change Research, Washington, DC, July 2004.
15 European Environment Agency, Impacts of Europe's changing climate, August 18, 2004. http://reports.eea.eu.int/climate_report_2_2004/en/tab_abstract_RLR
16 Leonard David, Senior Space Writer, NASA, June 2004, http://www.space.com/scienceastronomy/geoengineering_040601.html
17 Ibid. II-3
similar graph on cover), produced by NASA,18 provides convincing evidence that the global temperature is increasing, even though the increments of change may seem small.
Figure II – 3 Global Temperature Plot 1880-2000
Eileen Claussen, President of the Pew Center on Global Climate Change, recently gave a talk on “Global Climate Change and Coal’s Future.” In this talk, she said “Warming by itself, of course, is not proof of global warming. Climate conditions vary naturally, as we all know, and I am sure you have heard arguments that such natural variability, whether caused by volcanoes or the sun, can account for the climate change we’ve seen in recent decades. But when scientists actually take a look at the relative importance of natural vs. human influences on the climate, they consistently come to the same conclusion. And that is this: observed climate change, particularly that of the past 30 years, is outside the bounds of natural variability. Atmospheric concentrations of carbon dioxide are more than 30 percent higher now than they were just a century ago. Despite what you may hear, this increase in carbon dioxide is undeniably human in origin, and it is the only way to explain the recent trends in the global climate.”
Review of Sources of CO2 in the U.S. and in North Carolina
For about a thousand years before the Industrial Revolution, the amount of greenhouse gases in the atmosphere remained relatively constant. Since then, the concentration of various greenhouse gases has increased dramatically. The amount of CO2, for example, has increased by more than 30 percent since pre-industrial times and is still increasing at a rate of about 0.4 percent per year, mainly due to the combustion of fossil fuels and deforestation. Although natural emissions of CO2 are significant, we know that this increase is anthropogenic because the changing isotopic composition of the atmospheric CO2 betrays the fossil origin of the
18 National Aeronautics and Space Administration, Goddard Institute for Space Studies, Global Temperature Trends: 2002 Summation, 2004. http://www.giss.nasa.gov/research/observe/surftemp/ II-4
increase. The concentrations of other natural radiatively active atmospheric components, such as methane and nitrous oxide (N2O), are increasing due to agricultural, industrial and other activities. The concentrations of other nitrogen oxides (NO and NO2) and of carbon monoxide (CO) are also increasing. Although the latter gases are not directly identified normally as GHG, they play an important role in atmospheric chemistry and GHG concentrations.19
Nationally, man-made emissions of GHG continue to grow, in spite of efforts and rhetoric to the contrary20 (with residential leading the way with a 2.5 % annual growth in emissions). Although Duke Energy and Progress Energy, and other participants in voluntary GHG reduction programs, have proactively reduced their emissions substantially (from what they “would have been”), and are contributing to known reduction scenarios of over 266 tons/year,21 these reductions do not offset growth. It is obvious that the reduction of statewide emissions in North Carolina will require actions for both transportation and electric generation and other sectors, to achieve success in reversing the slope of the North Carolina emissions trend line. Even then, it is important that the rest of the world follow the same pathways. Due to the large rates of growth of GHG emissions, immediate reductions to former “base case” conditions are not possible without application of new technologies or serious efforts to curtail the consumption (combustion) of fossil fuels. Other sources alone would not be able to achieve reductions on the order needed to reverse the growth trend to the level of 1990 or some earlier date or benchmark. To further exacerbate the situation, countries such as China are growing very rapidly and increasing their usage of, and emissions from, fossil fuels at a very rapid pace and their emissions contribute equally to global increases on a molecule by molecule basis.
Two of the largest source categories of man-made CO2 in North Carolina are also coal fired power plants and transportation (automobiles, trucks, etc).22 These two categories each make up in the neighborhood of 30 per cent of the total anthropogenic emissions, and both continue to grow.23
According to a recently released report from the DOE, U.S. energy-related CO2 emissions in 2003 were up 0.9 percent from 2002 levels - from 5,736 to 5,788 million metric tons (MMT) of CO2. Between 2002 and 2003, energy demand rose by 0.6 percent because high natural gas prices in 2003 resulted in a shift to higher carbon fuels, such as coal and petroleum, and a colder winter than the previous year, with a 3.8-percent increase in heating degree days, required more fuel (primarily natural gas) for home heating. CO2 emissions in 2003 were below the 2000 level having fallen in 2001 by 1.8 percent and having grown by only 0.8 percent in 2002. 24
19 Intergovernmental Panel on Climate Change (IPCC), Climate Change 2001:Working Group I: The Scientific Basis, 2001, http://www.grida.no/climate/ipcc_tar/wg1/index.htm .
20 Andrew Freedman, Greenwire - EIA Report,, U.S. CO2 Emissions Continue Rise on Strong Residential Growth , July 2, 2004.
21The Center for Energy and Economic Development (CEED), NC DENR Interim Report on CO2 - Comments, August 2004.
22 North Carolina State Energy Plan, June, 2003, http://www.energync.net/State%20Energy%20Plan%2003.pdf .
23 Appalachian State University , Department of Geography and Planning, North Carolina’s $ensible Greenhouse Gas Reduction $trategies, Boone, NC 28608, January 2000, http://www.geo.appstate.edu .
24 U.S. Department of Energy, Energy Information Administration, Office of Integrated Analysis & F orecasting, U.S. Carbon Dioxide Emissions from Energy Sources 2003 Flash Estimate, June 2004, http://www.eia.doe.gov/oiaf/1605/flash/flash.html II-5
Figures II-4 and II-5 from the State Energy Plan provide graphic presentations of the distribution of energy consumption in North Carolina.
Figure II-4: Figure II-5 25
U.S. Energy-Related Carbon Dioxide Emissions
This report also shows that while coal produces the most CO2 per unit of energy, petroleum produces a greater portion of the U.S. CO2 emissions due to its larger consumption levels (transportation is a major component). Annual emissions growth from petroleum sources averaged 1.1 percent (1990 to 2003), annual emissions growth averaged 1.3 percent from coal and 1.0 percent from natural gas. In 1999, transportation-related CO2 emissions overtook industrial emissions and remain the largest source of energy-related CO2. Between 2002 and 2003, transportation CO2 emissions grew 0.5 percent. Gasoline demand was up 1 percent, but a 35-percent increase in ethanol consumption helped to moderate direct emissions in the transportation sector. Between 1990 and 2003, transportation CO2 emissions grew 19 percent (1.3 percent per year). Between 1990 and 2002, highway vehicle miles traveled grew by 32 percent (2.4 percent per year).
Between 2002 and 2003, residential CO2 emissions grew by 2.5 percent as housing stock was up by 1.1 percent and heating degree-days were up by 3.8 percent. Between 1990 and 2003, residential sector CO2 emissions grew by 28 percent (1.9 percent per year).
25 North Carolina State Energy Plan, June, 2003, http://www.energync.net/State%20Energy%20Plan%2003.pdf .
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This increase was driven by population growth of 17 percent (1.2 percent per year) and residential electricity demand growth of 39 percent (2.6 percent per year).
Between 2002 and 2003, CO2 emissions from the commercial sector grew 1.3 percent as the economy grew by 3.1 percent and commercial employment rose 0.3 percent. Between 2002 and 2003, commercial sector electricity sales rose 0.4 percent, but CO2 emissions rose 1.3 percent due to the higher carbon intensity of generation. Between 1990 and 2003, commercial sector CO2 emissions grew by 33 percent (2.2 percent per year). This increase was driven by commercial sector employment growth of 32 percent (2.1percent per year) and commercial sector electricity sales growth of 46 percent (2.9 percent per year), again as stated in the DOE report referenced.
Between 2002 and 2003, industrial energy-related CO2 emissions were unchanged; the index of total industrial output increased by only 0.2 percent. Between 1990 and 2003, energy-related industrial sector CO2 emissions declined by 0.9 percent (-0.1 percent per year), while total industrial output grew by 44 percent and manufacturing output grew by 53 percent. By 2003, energy-intensive primary metals output was 1 percent below 1990 levels, while basic chemicals output was 6 percent below 1990 levels.
The energy quandary, as summarized by Eileen Claussen of the Pew Center for Global Climate Change in a recent speech, boils down to three questions. The first is energy supply (and therefore security) - can we find enough energy to meet our needs from sources that are secure? The second issue is climate change - can we provide the energy we need in ways that do not harm the climate? Last, but not least is the issue of cost or price - can we meet our energy needs in affordable ways that will allow us to continue to grow our economy? Looking across these three issues, it is clear that we need a climate-friendly energy policy on the one hand and an economy-friendly climate policy on the other. Some elements of these policies will be the same, but the important point is that we need to think broadly about how best to achieve the related goals of protecting the climate and meeting America’s energy needs affordably in the decades ahead.26
For the electric generation sector, despite a 0.2 percent decline in generation, emissions increased by 44 MMT of CO2 (2.0 percent) in 2003. Higher natural gas prices caused generators to switch to other, higher carbon fuels. Coal-powered emissions increased by 64 MMT (3.5 percent), while emissions from petroleum increased by 19 MMT (24.7 percent), and natural gas-powered emissions fell by 39 MMT (12.8 percent).
Of course, national statistics and conclusions do not translate on a one to one basis with the specifics for North Carolina, but the general trend and inclinations are similar. The emissions in the country as a whole affect the situation and conditions in North Carolina and the rest of the globe, though not necessarily on a straight line relationship. Figure II-
26 Eileen Claussen, Pew Center on Global Climate Change, Energy Efficiency, Climate Change and Our Nation’s Energy Future, June 16, 2004, Washington, D.C. II-7
6 illustrates the relative importance of electric power to total CO2 emissions in the U.S. Figure II-727 summarizes the overall fuel use trends for the U.S.
Figure II-6.
27 U.S. Department of Energy, Energy Information Administration, Office of Integrated Analysis & Forecasting, U.S. Carbon Dioxide Emissions from Energy Sources- 2003 Flash Estimate, June 2004, http://www.eia.doe.gov/oiaf/1605/flash/flash.html
Figure II-7
Change in Electric Power CO2 Emissions by Fuel for the Total Power Sector, 2002 to 2003 in Million Metric Tons of CO2-60-40-20020406080CoalNatural GasPetroleum PowerSector Total
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Weather and Climate Trends in the Southeast
Many climate changes have occurred over geologic history. Evidence of these trends exists in ice cores and other tools used by scientists to look back into the past. Analyses of recent data have shown28 that temperature trends in the Southeast vary between decades, with a warm period during the 1920s through1940s, followed by a cooling trend through the 1960s. According to the cited reports, since the 1970s, temperatures have been increasing, with the decade of the1990’s temperatures being as warm as the peaks in the 1920s and 30s. Annual rainfall trends show very strong increases of 20-30% or more over the past 100 years across Mississippi, Arkansas, South Carolina, Tennessee, Alabama, and parts of Louisiana, with mixed changes across most of the remaining area. There has been a strong tendency for more wet periods in the Gulf Coast states, and a moderate tendency in most other areas. Obviously, not all of these changes are due to human intervention. Changes in climate, by definition, occur over long periods of time, discounting year-to-year variations.
The cited report also summarizes that the Southeast is prone to frequent natural weather disasters that affect human life and property. Over half of the nation's costliest weather-related disasters of the past 20 years have occurred in the Southeast, costing the region over $85 billion in damages, mostly associated with floods and hurricanes. Across the region, intense precipitation events have increased over the past 100 years and this trend is projected to continue. The southern heat wave and drought of 1998 resulted in damages in excess of $6 billion and at least 200 deaths, not to imply that it was the result of or only the result of climate change from global warming.
Human health concerns arise from projected increases in maximum temperatures and heat index in the region. These concerns are particularly great for lower income households that lack sufficient resources to improve insulation and install and operate air conditioning systems. Air quality degradation in urban areas is also a concern associated with elevated air temperatures and increased emissions from power generation, which can increase ground-level ozone. The higher the temperatures, the more air conditioning that is used, further aggravating the situation. Increased flooding in low-lying coastal counties is also likely to adversely impact human health. Floods are the leading cause of death from natural disasters in the region and nationwide.
North Carolina Climate and Perspectives
The State Climate Office at North Carolina State University has studied changes in the state, and in DAQ’s April 2004 workshop session, information was provided indicating that they have concluded that changes do occur that are due to human intervention and activities.29 Even surface reflectivity modification activities such as paving of highways and parking lots cause changes in atmospheric temperature, as do changes in crops and the vegetative cover from agriculture and forestry practices. Actions all over the globe impactson the climate in North Carolina. Conversely, actions in North Carolina similarly
28 Ezra Millstein, The Potential Impacts of Global Warming on the Southeast, World Wildlife Fund, from the First National Assessment of the Potential Consequences of Climate Variability and Change, http://www.climatehotmap.org/impacts/florida.html
29 Bryan Boyles, Presentation to DAQ Mercury & CO2 Workshop, April 19, 2004, Raleigh, NC (See Appendix A).
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contribute to changes around the world. Very little association between real time changes in North Carolina emissions will be reflected in immediate and traceable change in the state, and little changes relative to the whole problem in the global sense. A 100+-year plot of temperatures in North Carolina from the National Climatic Center database (Asheville, NC) is shown in Figure II-8, showing a trend upward in recent years. Equally important are land use patterns, development, urbanization and changes in GHG.
Figure II-8
Statewide Average Temperature for North Carolina (1885-2004)
Source National Weather Records Center30
Implementing the CSA will result in reductions in sulfur dioxide (SO2), and thus, the reduction of atmospheric sulfates. These sulfates result in formation of small particles in the air that also contribute to the greenhouse effect. As the CSA-required scrubbers are put on line and the reductions in SO2 occur, the greenhouse effect is expected to be reduced somewhat by this effect. It is not possible to make this relationship quantitative, however.
The State Climate Office also indicates that there are good science reasons for North Carolina to begin to make reductions in GHG, including CO2, and that it should start now.31 The known science is represented through models, but the models are not sufficiently refined to be able to reflect all situations. However, the evidence and associations are strong. On the other hand, models and records allow for tracking of global changes over the past several years. These models don’t make reliable predictions for the next 100 years, but can be accepted as directionally correct. They also do not do a
30 National Climatic Data Center, Climate at a Glance, North Carolina, http://climvis.ncdc.noaa.gov/cgi-bin/cag3/hr-display3.pl.
31 Bryan Boyles, Presentation to DAQ Mercury & CO2 Workshop, April 19, 2004, Raleigh, NC (See Appendix A).
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good job on local patterns, but are better for global changes. Precision is not good but general changes are directionally good. The projected numbers will likely continue to change over the next several years and decades.
North Carolina will be most vulnerable in the coastal areas if projections come true. Other changes may occur if warming and climate changes cause a migration of the “sweet spot” for growing various crops and natural vegetation. Some researchers32 even project an increase in poison ivy, but again, this is speculation and not necessarily agreed to by all scientists and evidence.
If the global community does not reduce emissions of GHG significantly, some project that North Carolina will likely be left with a climate similar to that of central Florida,33 a dramatically different coastline due to sea-level rise and subsequent inundation34, an increased occurrence of heat-related asthma and death,35 and hundreds of millions of dollars in losses from severe weather events.36 However, it is argued that if sufficient reductions are implemented quickly, and globally, the costs associated with these impacts can be alleviated. At the same time, these actions can stimulate the State’s economy, according to some advocates. Innovative, business-oriented policies that create a market for GHG, or equipment for their reduction will potentially align environmental goals with business goals and generate revenue is a strong argument for action.
32 William H. Schlesinger, Duke University, Nicholas School of Environment and Earth Sciences, Panel Presentation at the May 2004 NC Climate Education Partnership.
33 Ibid.
34 Union of Concerned Scientists, Impacts of Climate Change in the US, October 2003, http://www.climatehotmap.org/impacts/florida.html. .
35 Physicians for Social Responsibility, “Death By Degrees: The Health Impacts of Climate Change in North Carolina,” March 2001.
36 National Weather Service, Office of Climate, Water, and Weather Services, “State Summary Statistics 2003.”
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CHAPTER III IMPACTS AND ECONOMICS OF CLIMATE CHANGE
It is not possible to provide an original, complete, authoritative discussion and analysis of all physical and economic impacts for North Carolina within the confines and limitations of this report and the information available. However, some general tendencies and observations can be made. That is the purpose and intent of this chapter.
A Backdrop of Growth in Southeastern States
The Southeast "sunbelt" continues to be a rapidly growing region with population increasing by more than 30 percent between 1970 and 1990. Much of this growth occurred in coastal counties with expectation that this growth will continue for the several years. The number of farms in the region decreased 80 percent between 1930 and 1997, but still produces roughly one quarter of US agricultural crops. The Southeast has become America’s "wood basket," producing about half of America’s timber supplies. The region also produces a large portion of the nation’s fish, poultry, tobacco, oil, coal and natural gas. Prior to European settlement, the landscape was primarily forests, grasslands, and wetlands, but by 1920, most of the native forests were converted to managed forests and agricultural lands. Although much of the landscape has been altered, a wide range of ecosystem types exist and overall species diversity is high.37
Projected Climate Change Impacts
The United Nation’s Intergovernmental Panel on Climate Change (IPCC) projects that, because of elevated concentrations of GHG in the atmosphere, the rate of sea level rise for the next 100 years is likely to be at least double the rate that we have experienced over the last century. The IPCC estimates that sea levels in the Atlantic Ocean are likely to rise 19 inches by 2100, and could rise by as much as 36 inches in the same period if GHG emissions go unchecked. If these projections are experienced, by 2030, there could be a 10-inch sea level rise along the North Carolina coast. The effects of potential further melting of the Greenland and Antarctic ice sheets are not included in these scenarios. Recent research suggests that this melting could have a faster and even more serious impact on sea-level rise than previously thought.38, , 3940Of course, not all scientists are in agreement with these conclusions or projections, but the consensus continues to grow.
Tools such as climate models are often used to integrate the complex interactions and effects to provide a basis for conclusions. Such climate model projections exhibit a wide range of plausible scenarios for both temperature and precipitation over the next century. Two commonly used models are the Hadley Model and the Canadian model.41 Results of such models, though often challenged, are generally accepted as the best available basis for
37 Ezra Millstein, The Potential Impacts of Global Warming on the Southeast, World Wildlife Fund, from the First National Assessment of the Potential Consequences of Climate Variability and Change, http://www.climatehotmap.org/impacts/florida.html
38 H.J. Zwally, Abdalati, W., Herring, T., Larson, K., Saba, J., and Steffen, K., Surface melt induced acceleration of Greenland ice-sheet flow, Science- 297, 218-222, 2002.
39 J. Hansen, Defusing the global warming time bomb, Sci. Amer., 290, no. 3, 68-77, 2004.
40 Quirin Schiermeier,. A Rising Tide, Nature, 421, 114-115, 2004.
41 Ezra Millstein, The Potential Impacts of Global Warming on the Southeast, World Wildlife Fund, from the First National Assessment of the Potential Consequences of Climate Variability and Change, http://www.climatehotmap.org/impacts/florida.html .
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projections and have been endorsed by the National Academy of Science.42 Both of the principal climate models were used in the National Assessment project,43 and both indicated warming in the Southeast, but at different rates. The Canadian model shows the Southeast experiencing a high degree of warming, which further translates into lower soil moisture as higher temperatures increase evaporation. The Hadley model simulates less warming and a significant increase in precipitation (about 20 percent). Some models suggest that rainfall associated with El Niño and the intensity of droughts during La Niña phases will be intensified as atmospheric CO2 increases.
In addition to seal level rise, many areas along the North Carolina coast are believed to be sinking by about 7 inches per century. This means that some areas of coastal North Carolina may likely experience an accelerated rate of inundation, regardless of climate effects. A sea level rise (or sinking of the land mass) of less than 14 inches would likely inundate about 770 square miles of the North Carolina coast, an area nearly the size of Great Smoky Mountains National Park.44 The State’s coastal wetlands and other low-lying areas could be flooded, and the Albemarle and Pamlico sounds could become open waters. The North Carolina coastal areas are already some of the most vulnerable to extreme weather events in the U.S., and even low-intensity storms create billions of dollars in damage.45 The combined effects of rising seas and sinking lands could drastically change much of our coastline and barrier islands, increase vulnerability to storms, and put billions of dollars of coastal property at risk.
Assuming these projections are fulfilled, traditional approaches such as flood levees, elevated structures, and building codes, will not be adequate alone to prevent or even manage damage in the coastal zone as sea level rise would continue to increase the threat of storm-surge flooding in virtually all Southeastern coastal areas. Improvements in risk assessment, coastal and floodplain management, linkage of insurance to policies for mitigating flood damage, and local mitigation planning might help decrease potential economic impact. Changes in climate and sea-level must be integral parts of coastal communities develop strategies for hazard preparedness and mitigation. 46
Potential Economic Impacts Associated with Climate Inaction
Associating “real” economically defensible costs with any particular inaction is difficult and speculative at best. However, according to a report prepared for the United Nations Environment Program, “Worldwide economic losses due to natural disasters appear to be doubling every ten years, and have reached almost $1 trillion over the past 15 years. If current trends persist, the annual loss amounts as estimated by UNEP, will come close to US $150
42 Climate Change Impacts on the United States: The Potential Consequences of Climate Variability and Change, A Report of the National Assessment Synthesis Team, U.S. Global Change Research Program, www.usgcrp.gov/ .
43 U.S. Global Change Research Program , Climate Change Impacts on the United States: The Potential Consequences of Climate Variability and Change, A Report of the National Assessment Synthesis Team, www.usgcrp.gov/.
44 Ben Poulter, Duke University, and Sam Pearsall, The Nature Conservancy, 2003.
45.H. Levinson and Waple, A.M, State of the Climate in 2003, Bulletin of the American Meteorological Society Vol. 85, No. 6 June 2004.
D46 , U.S. Global Change Research Program, Climate Change Impacts on the United States: The Potential Consequences of Climate Variability and Change, A, Report of the National Assessment Synthesis Team, www.gcrio.org/NationalAssessment/.
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billion within the next decade.47 North Carolina’s share of this estimate would also be difficult to assess. However, according to one report, in 2002, North Carolina experienced more than $678 million in weather-related losses and government expenditures.48 This is not to imply a direct relationship with climate change, but there is certainly an expected connection.
Tourism has definite potential for economic impacts if the climate projections hold true, especially with regard to a rising sea level. In 2001, tourism in North Carolina’s 20 coastal counties generated an economic impact of nearly $1.8 billion. Accelerated sea-level rise would threaten this revenue and billions of dollars worth of property.49 The costs of health, agriculture and other related costs would likewise be large.
However, there are also potential benefits and opportunities associated with development of renewable energies, improvements in energy efficiency and related technologies in the state. According to California studies, renewable energy development can generate even more jobs than fossil fuel-based energy production on a common basis of megawatt delivered.50
Nothing affects the business climate of a company as much as making a profit, or not. That is a basic reason why the company exists and is in business. If the environmental, such as greenhouse mitigation, effort generate additional income, this tends to get the attention of the management of the company and is likely to lead to further rewarding experiences.
Weather-related Stresses on Human Populations
The US experienced 42 weather-related disasters over the past 20 years that resulted in extensive damage and costs in excess of $1 billion each; 23 of these occurred in the Southeast, mostly in the form of floods and hurricanes. Projected sea-level rise could increase the risk from flooding to low-lying coastal counties from the Carolinas to Texas, which could adversely impact human health, threaten lives and cause extensive economic damage. Heat waves also take their toll; the southern drought of 1998 resulted in damages in excess of $6 billion. The same year, a combination of an unusually wet winter, dry summer and high heat led to wildfires in Florida that burned roughly 500,000 acres of land. Heat waves increase the risks of heat related illness and mortality and increase ozone production affecting primarily the elderly, the young and those who are already suffering from respiratory or other illnesses. While these are natural occurrences, climate induced changes to them can likely increase similar effects.51 Such increases cause individuals to experience increased economic loss, increased stress from concern and worry over their physical plight and subsequent or related economic security.
47 Climate Change and the Financial Services Industry: Module 1 – Threats and Opportunities, United Nations Environmental Program and Innovest, http://www.innovestgroup.com/.
48 Beth Lander, The Costs of Inaction, US PIRG Education Fund, 2003.
49 The Coastal Zone Management Act in North Carolina, National Oceanic and Atmospheric Administration, US Department of Commerce, 2003.
50 Karen Rindge, Renewable Energy: Good for NC’s Economy, Carolina Sun, Summer, 2004
51 Ezra Millstein, The Potential Impacts of Global Warming on the Southeast, World Wildlife Fund, from the First National Assessment of the Potential Consequences of Climate Variability and Change, http://www.climatehotmap.org/impacts/florida.html.
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Climate Change Effects Projected for Southeastern Forests
Evidence from long term monitoring indicates that climate change would likely affect individual growth rates directly by way of overall warming or change in regional moisture balance. Information presented at DAQ’s April 2004 Workshop indicates an increased growth rate in trees and other vegetation will occur due to such changes.52 Climate shifts will also likely affect tree mortality and recruitment rates by altering the frequency and intensity of stand disturbances. Results suggest that disturbance effects are stronger and quicker than growth effects. Because individual trees grow quickly and the species involved are not particularly long-lived, responses to climatic change could be relatively rapid. In natural area preserves, Chinese tallowtree and other non-native woody species (including poison ivy) may become more important if disturbances increase. In commercially managed forests, increasing disturbance rates may result in higher timber losses.
The variety of spatial and temporal influences on forest processes, coupled with uncertainties associated with climate prediction, makes difficult the assessment of the effects of changes in climate on forest dynamics at the ecosystem level. Nevertheless, research at Rice University not only identifies specific climatic effects on particular life stages or processes, but it also provides critical information for improving our understanding of the context within which these effects are likely to occur.53
Background on Emissions Trading Programs
In the last two decades, emissions’ trading has emerged as a favorable policy mechanism to reduce air pollution. This market-based approach can often cost-effectively reduce selected air pollutants by allowing businesses to buy, trade and sell their “rights to emit” specific pollutants. If companies reduce their emissions below the limits set by government caps, they can sell their surplus reductions to companies who face higher on-site reduction costs. Businesses are thus given financial incentive to reduce emissions, under an overall umbrella of region-wide reduction totals. Such a trading market system already exists for sulfur dioxide (SO2) and nitrogen oxides (NOx) under the federal Clean Air Act’s Acid Rain Program.54 CO2, being a gas, readily mixes globally. A CO2 molecule emitted anywhere has an effect on climate everywhere. This makes CO2 an ideal candidate for national and state emissions trading within a scale of an international market place. A national carbon market, which will require national carbon caps, provides a promise to stimulate innovation in the private sector and enable society to make reductions in more cost-effective ways.
Options exist to use the current “lead time” before the caps are established, to begin preparing for such a national and international global carbon marketplace through pilot programs and
52 William H. Schlesinger, The Global Carbon Cycle and the Duke Forest Free-Air CO2 Enrichment (FACE) Project, Duke University, Nicholas School of Environment and Earth Sciences, Presentation to DAQ Mercury & CO2 Workshop, Raleigh, NC; April 21, 2004 (See Appendix A).
53 Paul A. Harcombe, Rice University, Department of Ecology and Evolutionary Biology, Effects of Climate Change on Southeastern Forest, USGS http://www.nwrc.gov.
54 U.S. EPA, Acid Rain Program Web Page, http://www.epa.gov/airmarkets/arp/ , August 2004. III-4
other means. Many sectors throughout the state will then more likely have opportunities and motivation to develop greater and more incentives for reducing their greenhouse gas emissions in a more timely fashion.
The Currency of a Carbon Market: Carbon Credit$
The tradable commodity in a carbon marketplace is CO2 equivalents (tons) or “carbon credits.” These carbon credits may be earned by companies and landowners who reduce CO2 and other greenhouse gas pollutants like methane. Credits can be earned by reducing greenhouse gas emissions directly. Under some scenarios, opportunities to earn credits may also occur through activities that indirectly reduce greenhouse gas pollution, such as renewable energy development or carbon sequestration in forests.
Supply and demand drives the marketplace. To function efficiently, a carbon market needs buyers and sellers. Currently, in North Carolina, many sectors have the potential to supply carbon credits. Possible suppliers include:
• Swine industry: for converting waste and reducing methane for fuel.
• Forestry industry: for sequestering carbon by reducing deforestation and by increasing reforestation projects for both sequestration and for renewable energy.
• Reforestation of agricultural land:
o Planting agricultural land to trees where tobacco farmers previously grew tobacco and tobacco production is expected to be discontinued, and
o Tree planting on agricultural lands that were former wetlands converted to agriculture prior to 1976, to create “new” wetlands for Wetland Mitigation Banking or mitigation credit.
• Agriculture industry for sequestering carbon and reducing energy use through no-till farming.
• Renewable energy industry for providing lower GHG impact energy.
• Manufacturers and utilities: for voluntarily decreasing direct emissions of CO2 before implementation of mandated caps.
• Other Corporations (e.g., universities and business establishments, etc.): for voluntarily decreasing emissions through new energy-efficient building designs and transportation innovations.
Because North Carolina does not have a CO2 cap, there is no current demand within the state for carbon credits. North Carolina could potentially create an economic engine for the State by implementing GHG emission reductions and establishing a carbon marketplace. Several organizations already exist that could help our State track its carbon credits and trading activity. Preparing North Carolina for the emerging carbon markets could be made possible through one of several policy options to avoid losing any such revenues to other states. Many agree that a national cap on CO2 emissions is necessary and forthcoming.
As national carbon caps are established, North Carolina will likely need to anticipate and be prepared for the related economic opportunities. Carbon caps will undoubtedly bring a national carbon marketplace, characterized by buying and selling of carbon equivalence
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credits. North Carolina should further evaluate the steps required to take advantage of such carbon market and implement evolved policies that prepare our utility, swine, forestry, agriculture and other industries, to sell carbon credits for their emissions reductions or for sequestering carbon in trees and soil. The emergence of new technologies to reduce greenhouse gas emissions from power plants, confined animal feeding operations, and other emission sources presents potential opportunities for North Carolina. By developing and evaluating ways for providing incentives for the use of such innovative technologies, we can potentially reduce our state’s greenhouse gas emissions while addressing other environmental problems and even creating jobs.
In addition to capitalizing on economic opportunities, many feel that our state’s top decision-makers need to be evaluating mitigation scenarios and planning how to minimize potential climate change threats (such as coastal inundation, lost agricultural revenue and human health issues). In light of the global and national pressures for action, and because of the threats climate change poses to our state, many feel that North Carolina needs to prepare its economy and its people for a carbon-constrained world.
Potential Cost Scenarios
The DAQ workshop in April 2004 (See Appendix A) provided a beginning level of cost analysis of efforts to reduce CO2, from different viewpoints. Dr. Anne Smith’s presentation55 represented such analyses for both mercury and CO2 measures from an industry perspective. Related discussions reflected broad reactions and variant perspectives one would expect from this type of analysis, from both environmental and industry sectors. The industry perspective is primarily that economic impacts of North Carolina attempting to address CO2 unilaterally would be significant and negative arguing that the State needs to await federal action on CO2, and the environmental advocates perspective is that action needs to begin now and will provide significant economic return and “reimbursements.”
Some of Dr. Smith’s main points were:
• CO2 comes from coal, oil and natural gas generation, but coal emits roughly 2x more CO2 per kwh than natural gas.
• Retrofit controls are the most costly control option with a switch from coal to gas costing about $30-50/ton C for first few %; switching from coal to renewables costing about $100/ton C for first few %; and removal of CO2 from stack costing about $300/ton C (large reductions).
• On-system controls are expensive even for new generation. For example, she believes that building IGCC with C-sequestration would cost about $100/ton C, with large reductions possible, but likely with decades of lead-time.
• Fuel Switches, according to the analysis, would have various effects and considerations:
55 Dr. Anne Smith, Charles Rivers Associates, Washington, D.C., Insights on Economic Impacts of Utility Mercury and CO2 Controls, Presentation at NC Division of Air Quality Mercury and CO2 Workshop, April 20, 2004, Raleigh, NC. (See Appendix A). III-6
o Coal-to-Gas: A 20% reduction in current coal MWh would require: 1) a 50% increase in current gas generation, 2) more new gas plants to be built, 3) drive natural gas prices up (affecting other industry), and would reduce national CO2 emissions <3%,
o Coal-to-Renewables: A 10% reduction in current coal MWh would require >5-fold increase in renewable capacity, to reduce national CO2 emissions <3%, and
o Both would drive $/ton higher than the estimates above for “first few %” of reductions, and would require a multi-decade approach with on-system reductions costing less than $100/tonne C.
Other “off-line” changes may be more achievable she surmised: such as changes in land use practices, changes in forestry practices, energy demand-reduction projects, and projects in other countries that reduce their CO2 baseline (a trading option). The presentation concluded that the costs would be much cheaper (<$10/ton C). Some important questions would remain: 1) Are these real reductions from baseline?, 2) Are these permanent reductions?, and 3) Will they remain cheap once there is a real demand for them? She concluded that on-system reductions would cause much higher price increases.
Dr. Smith contends that a unilateral North Carolina policy would result in the potential for power to be brought in from outside states without a carbon cap, that the cost of power and gas would rise to industry in the State, National and global emissions would not be reduced, jobs may be lost and consumers in the State will face losses in living standards. On the other hand, she indicated that as a part of a unified national carbon policy, inter-regional competitive issues would be diminished, competition would be increased with international sources, there would still be ‘leaks’ in emissions on an international basis, but that this State would then face impacts more similar to the U.S. wide average impacts. These concepts and information need to be debated and resolved before final recommendations are made.
Making analysis of cost impacts even more difficult will be the impact of changes in supplies, or perceived changes in supplies of energy from various sources in the world and how much it will cost. All energy prices, whether for gas, oil or coal (or other) are distinctly interrelated and fluctuate together, with some delays. Recent excursions in prices for crude oil may be temporary, but there are many who project that production of crude will peak in the next few years and begin to fall. Such changes would have a significant impact upon energy costs, but also serve to make it more difficult to determine the true effects and costs of making reductions in consumption. The graphs below in Figures III-1 and III-2 do not reflect more recent dramatic changes in cost and supply resulting to middle eastern and Russian influences on the market, but these recent events only seem to accelerate and exacerbate the issue and provide a backdrop for future discussions and conclusions.
These positions likely will undergo additional analyses prior to release of the final report, but reaching a consensus and a common resolution of the different perspectives will likely be a major effort.
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Figure III-1, World Oil Production 56
Figure III-2, U.S. Oil Production, 1950-97
56 National Association of State Energy Officials, Understanding the Petroleum Industry, 2004, http://www.naseo.org/Default.htm
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CHAPTER IV REDUCTION AND SEQUESTRATION TECHNOLOGIES AND OPTIONS
Over 100 coal-fired power plants have been announced (some since cancelled) for planning and construction in the U.S. in recent years, according to Cinergy CEO Jim Rogers in a recent speech. He interjected that the current energy policy in the U.S. seems to be “find more/use more.”57 “This policy and practice has to change before these alternatives will begin to be viable to replace and reduce emissions,” he summarized. Targets are needed that will provide for these advances to be put into practice and result in real and continuing reductions in the carbon limited future.
Since the release of the First Interim Report in 2003, DAQ has continued to review available literature and emerging information. In addition, DAQ hosted a workshop in April of 2004 that involved stakeholders, experts on various related topics and other interested participants. This chapter is primarily a summary and update of pertinent technical and related information on reductions in use of fossil fuels and sequestration of emissions collected from that workshop and other sources since the release of the first report.
Various methods and scenarios have been suggested to prevent emissions by reductions in carbon-fuel consumption and to capture and sequester them post-emission. These proposals cover a wide range of cost and practicality. Some are obviously too expensive or sufficiently impractical, or so energy inefficient, that they may be readily dismissed (for the time being, at least). Others may have promise and be options that may be worth further consideration, maybe in a shorter range of five to ten years. Others may require further technical development and piloting on large scale, such that they may be more likely worthy of further consideration within10 to 30 years. The purpose of this discussion is to identify the most obvious, potentially important and promising of those options and place them in the proper category for future re-evaluation. At this point, none of these options should be viewed as recommendations, but potential options for future consideration for selection of recommendations. Such final recommendations and changes may also require further coordination outside the State with other regional and national groups.58
Most action-initiating activity to date seems to be in the government circles. However, in 2003, the federal government and industry organizations representing companies from 12 energy-intensive economic sectors joined in a new voluntary partnership called “Climate VISION.” The economic sectors include automobile manufacturers, chemical manufacturers, railroads, the oil and gas industry, the electric power industry, the mining industry, and the cement, iron and steel, aluminum, magnesium, semiconductors, and forest products industries. Joining this initiative were the U.S. Departments of Energy (DOE), Transportation (DOT), Agriculture (DOA) and the U.S. Environmental Protection Agency (EPA). Climate VISION
57 James Rogers, CEO of Cinergy Corporation, Keynote Speaker at Air & Waste Management Association meeting in Indianapolis, IN, (Personal notes of James Southerland), June 23, 2004.
58 Gerald R. Hill, Ph.D., Senior Technical Advisor, Southern States Energy Board, Southeast Regional Carbon Sequestration Partnership, Presentation to North Carolina Division of Air Quality Workshop on Mercury and CO2, Raleigh, NC, April 21, 2004. (See Appendix A).
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works with industry to identify and pursue cost-effective solutions to reduce emissions using existing technologies; develop tools to calculate and report emission intensity reductions; speed the commercial adoption of advanced technologies; and develop strategies to reduce emissions intensity in other economic sectors.
The electric power sector participates in the Climate VISION program through the Electric Power Industry Climate Initiative (EPICI) and its Power Partners program, with the DOE. The memberships of the seven organizations that comprise EPICI represent 100% of the power generators in the United States. The power sector, through EPICI, plans to finalize its work plan in the form of a Memorandum of Understanding (MOU) with DOE. The MOU will outline proposed implementation actions to reduce greenhouse gas emissions intensity by 2012. The power sector, in conjunction with DOE and other federal agencies, will implement the actions. In North Carolina, Duke Energy and Progress Energy are both participating in this program through their membership in, and participation with, the Electric Power Research Institute (EPRI).59 Projects proposed or included to date include planting of additional forest for sequestration and other similar programs.
As discussed in the First Interim Report, the Appalachian State University Energy Center produced a report in January 200060 that provides an in-depth analysis by sector of their recommendations for a sensible GHG reduction strategy. This document has some parallels to that report and draws upon it to some extent without reproducing the estimates and calculations included in that report. That same Center assisted in a major portion of the tasks associated with development of the State Energy Plan (SEP) as discussed further on the following pages and in Appendix D to this document. The Figure IV-1 below, extracted from that report, gives a good refresher or reference point from which to review the importance of the various sectors toward realizing a potential solution.
Figure IV-1
59 Personal Communications (emails) from George Everett of Duke Energy and Cheryl Vetter of Progress Energy, to James Southerland, NC DAQ, August 2004.
60 Department of Geography and Planning, Appalachian State University, North Carolina’s $ensible Greenhouse Gas Reduction $trategies, Boone, NC, January 2000. http://www.geo.appstate.edu.
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Energy Efficiency : Use Less - The State Energy Plan
The most obvious way to reduce CO2 emissions is to burn less carbon-based fuels. This is essentially one of the major goals of the State Energy Plan. For most practical purposes, the reduction of CO2 and reductions of energy usage are synonymous. Thus, the State Energy Plan (SEP) is closely related to the development and implementation of action plans for the reductions of GHG in North Carolina. Efforts and actions to reduce energy consumption will translate into reductions in GHG emissions, particularly CO2.
The First Interim Report discussed the SEP in limited detail. The SEP was approved in June of 2003. The State Energy Office (SEO) and other departments are now working on strategies for implementing that plan. For example, the SEP envisions a North Carolina Climate Action registry as one of its products.61 This is in relative harmony with the implications of programs to reduce greenhouse gases. Some additional tracking mechanisms for the results and progress of reducing emissions through the implementation of the SEP, for example, may be necessary to allow tracking of progress for the overall effort. Thus, the two programs are closely linked and must track closely together. A copy of the NC’s SEP may be obtained from the SEO, or may be downloaded from their web site.62 The SEP provides most of the information discussed in this section of the report.
The SEP indicates that CO2 emissions will likely continue to increase into the near future and the only viable options currently available for reducing these emissions are increasing efficiency and switching to alternative sources of energy generation, such as nuclear, hydropower, solar, wind and biomass. Although combustion of biomass produces one molecule of CO2 per molecule of carbon in the material, just as fossil fuels do, the biomass is “re-used” carbon that was not derived from ancient deposits or previously sequestered emissions, and thus does not have the same net impact upon the environment as do the “new” fossil fuels. Large conversion may be unrealistic without wholesale switching to more expensive natural gas combustion with less certainty in supply.
The Secretary (or designated representative) of the Department of Environment and Natural Resources (DENR), represents DENR on the Energy Policy Council (EPC). This facilitates coordination and implementation of the SEP and its integration with parallel actions and plans to reduce GHG. In 2003, the EPC approved 93 measures that meet the plan’s objectives. These measures, in the form of policy and program recommendations, primarily address the following sectors and issues in the state:
• Energy, Economics and the Environment
• Fossil and Nuclear Fuels
• Electric Utilities and Energy Use
• Alternative Fuels from Biomass
• Alternative Energy Sources
• Energy Use in the Public Sector
• Energy Use in the Residential Sector
61Larry Shirley, Director, State Energy Office, Development, Components and Status of the NC State Energy Plan, Presentation at NC DAQ Mercury and CO2 workshop, Raleigh, NC, April 19, 2004. (See Appendix A).
62 State Energy Plan, http://www.energync.net/State%20Energy%20Plan%2003.pdf .
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• Energy Use in the Commercial Sector
• Energy Use in the Residential Sector
• Energy Use in the Transportation Sector
• Funding for Energy Policies and Programs
Appendix D contains a more extensive listing of SEP recommendations and lists the 15 key legislative, regulatory, and administrative policies the EPC determined would require action in 2003 and 2004. Some of the items discussed in more detail below also relate to elements in that plan. Basic elements of the plan are addressed below.
Programs to Directly Increase Energy Efficiency at Generation Units
Most of the existing coal-fired boilers in North Carolina, and elsewhere, were built many years ago, in the general era between 1950 and 1980, with an expected lifetime of 30 to 50 years. Thus, the population of boilers is aging, many already beyond their originally expected useful life. In the meanwhile, a number of design and technology advances have been made that could potentially make improvements in efficiency if applied to existing facilities. These improvements may only be on the order of a percent or a few percent, but are significant in the economics of running a large power generation unit constantly for several years. The increases in design efficiency generally allow more production of electricity with less fuel and with less emissions of nitrogen oxides, which leaves less to be removed by other means. Due to the costs and the complexity of the regulations (e.g., State/federal new source review and prevention of significant deterioration regulations) many improvements and refinements that might have made have been discouraged or confused in complications. Some efficiency improvements on generation units can be made, but may require consideration of such projects under EPA’s new source review (NSR) rules.
In the December 31, 2002 proposed rule on Routine Maintenance, Repair, and Replacement (67 FR 80290), EPA indicated that, “NSR should not impede industry in making energy and process efficiency improvements which, on balance, will be beneficial both economically and environmentally” (57 FR 80301). The State is currently reviewing related rules and policies to determine if any changes need to be made to North Carolina rules and whether there may be any additional latitude resulting to encourage (or not discourage) such projects.
State Agencies, Local Governments, Schools & NPOs
The State’s cost of energy and fuel (excluding gasoline) in 2002 was $179 million. 63 The largest share of the State’s energy expenditures was for electricity, which was 65 percent of the State’s total energy costs. The university system is the largest consumer of energy in North Carolina’s state government. Over half (53 percent) of the State government’s energy expenditures occur at the universities. New education construction bonds passed in 2000 may further increase energy consumption by the university system if offsetting
63 State Energy Plan, State Energy Plan, North Carolina State Energy Policy Council/State Energy Office, http://www.energync.net/State%20Energy%20Plan%2003.pdf ., June 2003.
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energy efficiency measures are not incorporated into these projects and retrofitted to existing structures.
The North Carolina League of Municipalities, North Carolina Association of County Commissioners, and North Carolina Association of School Boards have formed a collaborative association named LoGESO (Local Government Energy Savings Organization). In 1999 and 2000, LoGESO conducted an assessment focused on what they might do to reduce energy expenditures. They evaluated steps that constituents might take to conserve energy and improve efficiency. The study found fewer than 25 percent of potential energy efficiency expectations had been realized in the sites focused on during the study. This was due, in part, because of the small size of many energy efficiency projects. They did not attract competitive bids from established firms, they concluded, due to the high costs of assembling bids. In addition, few local jurisdictions tracked and reported energy use and expenditures. Based upon the consultant’s experience elsewhere, North Carolina local governments could experience a 5-10 percent reduction in purchased energy through an aggressive energy reduction program. This would result in an estimated $50 million in savings over a five-year period.
The cost of energy represents a significant drain on State and local resources. Educational facilities also stimulate fuel use for transport of children to and from schools via both personal vehicles and school buses. The total cost of student transportation is a substantial portion of the total cost of energy for education. Increased adoption of walking and biking, as well as increased bus use by those commuting by private vehicles could save substantially on total energy consumption, and thus related emissions. 64
Commercial/Industrial
The commercial sector has a high potential for improving efficiency in both existing and new buildings. Insuring energy reliability, promoting wise land use and improving environmental quality are directly related to energy efficient construction codes and techniques. Efficiency strategies for commercial buildings include building energy efficiency, lighting efficiency and increased use of natural daylight, heating and cooling system efficiency, alternative energy options and hot water efficiency.
North Carolina’s industrial sector uses about 28 percent of the total energy used in the state (the highest in the state). Energy saving improvements for industry are typically grouped into four primary categories:
• General energy-saving technologies applicable to all manufacturing sectors, such as high-efficiency lighting and computer control of air conditioning.
• Industry-specific energy-saving technologies, such as recovery of “waste” heat.
• Energy management activities, such as energy audits, load control and full-time energy managers.
• Other innovative approaches, such as changing processes or developing new approaches for industrial development.
64 State Energy Plan, State Energy Plan, North Carolina State Energy Policy Council/State Energy Office, http://www.energync.net/State%20Energy%20Plan%2003.pdf ., June 2003.
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A study conducted by the national energy laboratories, including Oak Ridge, Lawrence-Berkeley and the National Renewable Energy Lab, concluded that nationwide energy savings of 7.4 percent in the industrial sector could be achieved by the year 2020 by implementing moderate energy saving programs. With a more aggressive approach, savings of 16.5 percent by year 2020 was determined to be possible. These savings excluded the effects of increased combined heat and power (CHP), or co-generation. With moderate implementation of CHP, the national labs’ report estimated that national energy savings of 1.1 percent could be achieved by 2020. Under such an aggressive program, an estimated 5.8 percent would be saved. The potential decreases in energy consumption from the policies recommended for the industrial sector of North Carolina total about 8.5 percent in existing industrial facilities and 12 percent in new facilities.
Residential
In 2000, residences in North Carolina accounted for 23 percent of the total energy consumption in the state. Because this sector concerns virtually every citizen of the state directly, energy use in residences remains key for energy efficiency. The residential sector provides tremendous opportunity for reducing energy use. Fortunately, many energy efficiency measures are cost-effective and provide additional advantages to the owner, such as improved comfort and increased home durability and benefits to the state, such as reduced air emissions, lower fuel imports and the economic benefits of direct expenditures for energy-saving products. New homes with greater energy efficiency usually cost just marginally more than comparable less efficient homes. Efficient homes help reduce the costs of home ownership, because the annual energy savings generally exceed the additional annual mortgage costs.65
65 State Energy Plan, North Carolina State Energy Policy Council/State Energy Office, http://www.energync.net/State%20Energy%20Plan%2003.pdf ., June 2003. IV-6
Renewable Energy (Substitution for Fossil Fuels – Also Addressed in SEP)
Although substitution of renewable energy for fossil fuel energy is somewhat inherent in the SEP, it is identified here separately because of its importance in many discussions on the CO2 topic. There are several promising ways to utilize renewable energy to potentially replace or substitute for the combustion of fossil fuels. One must also keep in mind that some sectors of renewable energy, such as combustion of biomass will also release CO2 emissions and though they substitute for fossil fuels, this release of GHG must be taken into account in evaluations. Several of the renewable energy sources generate electric current without any combustion or generation of CO2 or other GHG.
NC GreenPower, included in the SEP, and now in an active process of recruiting members or participants, is an existing (but new) program in North Carolina that provides customers with the option to purchase units of “green” power generated with renewable or other means of substitution for electricity that would be otherwise be generated from coal-fired units. The more participation there is from the customers, the greater the environmental benefits, including reductions in “new” CO2 from fossil fuels. This program is unique to North Carolina, with all three utilities included, as several co-ops. The program allows most citizens of the state the opportunity to participate (A “reasonable” premium is charged for the option to actually purchase the green power units with these funds being used directly to offset extra costs of procuring that power).
In the United States, we have grown accustomed to very dependable power. When the switch is flipped, it is rare for the lights not to come on. However, one of the potential downsides of renewable energy may be the loss of some of this reliability, according to the “naysayers.” A substantial quantity of new infrastructure dispersed among many locations would be required to provide the levels of “replacement” energy needed, and designs of those systems will need to keep reliability as a strong consideration. Some of this proposed capacity would not always be available when needed, which would likely require other generation capacity to be available for back-up when there are periods of rain (solar), low wind, disruptions in the supply of biofuel, etc.. Thus, such plans and changes would need to consider these options and situations holistically so that the system is adequate to cover all situations, at all times, whether by providing excess capacity of other renewable generation or by more conventional means. If the latter, some economic subsidy might be necessary to guarantee that this capacity, otherwise idle, would be available when called upon.
Solar:
The sun’s energy can be used in four primary ways:
• solar thermal,
• passive solar heating and cooling,
• day-lighting and
• Photovoltaic.
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Solar thermal collectors function relatively well in North Carolina’s diffused sunlight. Solar thermal includes using solar energy for heating or cooling of interior spaces and water heating. In addition, solar energy is used for cooling and refrigeration. When concentrated with lenses or mirrors, sunlight can generate boiling water which is used directly or to drive various types of engines. This steam can be used to run steam turbines to produce electricity, much like in coal-fired power plant.
Passive solar includes orienting windows toward the south, and using concrete and other heavy building materials for thermal storage and shading strategies that avoid summer overheating. The SEP reports that “Passive solar buildings can have comparable costs as similar, non-solar structures and yet save significantly on heating and cooling costs while providing improved comport and quality of light. The main constraints are lack of awareness and consumer demand along with inadequate training and interest among residential and commercial designs, builders an developers.”
Day-lighting is the practice of paying special attention to the use of natural lighting in the design stages of buildings and can provide an energy and cost savings in buildings if properly conceived and implemented.
Photovoltaic devices provide a newer frontier in capturing and using solar energy. They do not capture sunlight’s heat energy directly, but rather use solar radiation directly to stimulate a flow of electrons, thus generating electricity. Photovoltaic energy is cost effective in some remote locations, but further research and technical advances are needed before the cost per peak watt of electricity is economic in typical situations. Some new technologies are dual functioning to make them more cost effective. For example, a roof system could be made of photovoltaic material thus providing electricity and roof protection for a residence.
One of the big advantages of solar energy systems is that they are most effective in producing energy in the summer months, the season with the peak electric utility demand in North Carolina. The very nature of solar energy systems thus cut electrical demand on the electrical grid during peak demand periods.
Wind/Substitution
Wind power generation is the fastest growing electricity generation technology used in the world.66 Of the 10 wind classes that exist, determined by average annual wind velocities, the continental United States only has sites with the less intensive six classes. Class 5 and 6 sites are abundant in North Carolina’s western mountains; with class three and class four sites being located in the mountains and along the eastern coast. Many of the mountain sites could likely generate electricity in the range of $0.03 to $0.04 per kWh - competitive with new coal and natural gas generation. According to the Energy Efficiency and Renewable Energy Network, North Carolina has the capacity to produce 8
66 Dr. Dennis Scanlin, Appalachian State University,, Wind Energy in North Carolina, DAQ Mercury/CO2 Workshop, Raleigh, NC, April 21, 2004 (See Appendix A) IV-8
million MWh, or about 7 percent of current electricity consumption in the State. This would come from using wind technology in Class 3 and higher sites only.
Two tax programs encourage wind energy generation. The federal Production Tax Credit (PTC) provides $0.018 per kWh of wind energy generated, and North Carolina’s Renewable Energy tax credit (35 percent, with a maximum of $250,000). In order to compensate for existing development, environmentally sensitive areas, and other land-use conflicts, this estimate excludes 50 percent of total forests, 30 percent of total farmland, and 10 percent of total rangelands. The federal tax credit is in jeopardy of expiration which would be a significant blow to this program and the future of investments in wind energy.
Cost to site wind machines in areas with the greatest wind resources; namely the high ridges in Western North Carolina, is the single largest barrier to wind technology in North Carolina. The Mountain Ridge Protection Act of 1983, also know as the Ridge Law, was designed to prohibit the construction of unsightly structures taller than 35 feet on North Carolina ridges above 3,000 feet in elevation. Although exclusions exist for telecommunications towers, electrical transmission facilities, structures of a “relatively slender” nature, “minor” vertical protrusions, and even “windmills,” the North Carolina Attorney General stated that electrical generation equipment is in violation of the Ridge Law. If upheld, this interpretation effectively prohibits development of many sites with the best wind resources in North Carolina.
Hydroelectric/Substitution
Hydropower currently represents the primary renewable energy supply for utilities in North Carolina. In 1999, hydroelectric plants supplied over 3.5 million MWh of electricity or about 3.5 percent of total state electricity sales. Hydroelectric generation typically requires less initial capital than coal and nuclear facilities, but more than natural gas, while typically providing the most economical source of electricity in terms of actual costs of generation. With a price under $0.025 per kWh, the total cost of hydroelectric generation is the cheapest source of electricity currently available for North Carolina.
The Idaho National Engineering and Environmental Laboratory, under contract with the DOE, assessed North Carolina’s undeveloped hydroelectric generation potential. The study found 93 sites in North Carolina with approximately 508 MW of undeveloped generation capacity that might be used to generate electricity. The greatest capacity of any one site was 76 MW but over three quarters of the sites were estimated to be capable of providing less than five MW. According to the Energy Efficiency and Renewable Energy Network, North Carolina possesses roughly 8 million MWh of total new hydroelectric generation potential, which would meet approximately 7 percent of all generation in North Carolina.
A significant barrier to additional hydroelectric power for North Carolina is the drought experienced in recent years and the expiration of avoided cost contracts between electric utilities and owners of hydropower facilities. Hydropower’s environmental impact on the ecology of the operation site has also been a significant deterrent to new development. A
IV-9
shift away from large-scale projects to less intrusive low-head, small and micro-hydro projects has some responsibility. Rapidly growing demand for water for irrigation, industrial processes, cooling water, fish and wildlife considerations, and other human needs pose further limits to expanding hydroelectric development. All these factors will likely be considered when and if licensing or re-licensing events arise.
Biomass Burning/Substitution
Biomass is a carbon-based fuel, often derived from fast growing trees, or bushes, that can be used to fuel utility and other boilers. Though burning of biomass generates CO2, it substitutes carbon already in atmospheric and biome circulation, for fossil fuels, thus lessening the net impact of “new carbon” on the overall environmental system. Agricultural and waste management sectors provide potential sources of energy for both electrical generation and other direct uses as fuels. Additionally, recent proposals and programs for fire hazard reduction have increased the interest and economics of using small diameter (low economic value) trees, bushes and shrubs for replacement of fossil fuels in electric generation. Efforts to further evaluate and extend such efforts in North Carolina are underway at NCSU and in the DENR Department of Forest Resources.
DOE estimates that 15.8 billion kWh of electricity could be generated from renewable biomass fuels each year in North Carolina. This is enough electricity to potentially supply about 39 percent of the residential electricity demand in the state. Of these sources, 80 percent of the potential biomass fuels would be from wood waste from logging, industrial, yard waste, furniture manufacture and construction. While more biomass as fuel offers a partial replacement for fossil fuels such as petroleum or coal, combustion of the biomass still creates climate change emissions and may provide additional control issues for other pollutants, such as NOx and particulate matter.
The largest potential supply of woody biomass for energy is standing timber or “stumpage.” Much of North Carolina’s 18.3 million acres of forestland is occupied by low-value trees not well suited for traditional wood markets. Twelve million of these acres are considered as having high potential for wildfire, a danger not only to the forests, but also to the surrounding communities, especially North Carolina’s rapidly expanding urban-rural interface. On December 3, 2003, President Bush signed into law the Healthy Forests Restoration Act. This act targets forests presenting wildfire danger and calls for reductions in low-value standing fuels, restoration of healthy forests, and development of woody biomass energy. Development of a woody biomass energy market in Nor

CO2 Emission Reduction Options For
Coal-fired Electrical Utility Boilers and Other Stationary Sources
September 1, 2004
Second Interim Report Pursuant to Clean Smokestacks Act
Source: CCSP/Meehl
North Carolina
Department of Environment and Natural Resources
Division of Air Quality
The Requirement: Excerpted from the Act
[Title: An Act to Improve Air Quality in the State by Imposing Limits on the Emission of Certain Pollutants from Certain Facilities that Burn Coal to Generate Electricity and to Provide for Recovery by Electric Utilities of the Costs of Achieving Compliance with Those Limits]
SECTION 13. The Division of Air Quality of the Department of Environment and Natural Resources shall study issues related to the development and implementation of standards and plans to implement programs to control emissions of carbon dioxide (CO2) from coal-fired generating units and other stationary sources of air pollution. The Division shall evaluate available control technologies and shall estimate the benefits and costs of alternative strategies to reduce emissions of carbon dioxide (CO2). The Division shall annually report its interim findings and recommendations to the Environmental Management Commission and the Environmental Review Commission beginning 1 September 2003. The Division shall report its final findings and recommendations to the Environmental Management Commission and the Environmental Review Commission no later than 1 September 2005. The costs of implementing any air quality standards and plans to reduce the emission of carbon dioxide (CO2) from coal-fired generating units below the standards in effect on the date this act becomes effective, except to the extent that the emission of carbon dioxide (CO2) is reduced as a result of the reductions in the emissions of oxides of nitrogen (NOx) and sulfur dioxide (SO2) required to achieve the emissions limitations set out in G.S. 143-215.107D, as enacted by Section 1 of this act, shall not be recoverable pursuant to G.S. 62-133.6, as enacted by Section 9 of this act.
GENERAL ASSEMBLY OF NORTH CAROLINA - SESSION 2001 – (SENATE BILL 1078)
Ratified the 19th day of June 2002. (Ch. SL 2002-4 S.13)
Marc Basnight - President Pro Tempore of the Senate
James B. Black - Speaker of the House of Representatives
Michael F. Easley - Governor
CO2 Emission Reduction Options For
Coal-fired Electrical Utility Boilers and Other Stationary Sources
September 2004: Second Interim Report
Pursuant to the Clean Smokestacks Act of 2002
North Carolina
Department of Environment and Natural Resources
Division of Air Quality
Blank
ii
An Invitation from Secretary Ross
TO: Environmental Review Commission
Environmental Management Commission
FROM: William G. Ross, Jr.
DATE: September 1, 2004
SUBJECT: Mercury and CO2 Reports Required by Clean Smokestacks Act
On March 23, 2004, the United States Environmental Protection Agency recognized North Carolina and the Clean Smokestacks Act for outstanding, innovative efforts in improving air quality through regulatory and policy innovations and presented our state with a Clean Air Excellence Award. I had the privilege of saying a few words at the award ceremony in Washington, D.C., on behalf of our state, Governor Easley, and all the other partners who played vital roles in the passage of the law. It was a pleasure for me to describe the story of the Clean Smokestacks Act as a story about the power of innovation, partnerships, teamwork, and leadership.
The act, in addition to providing for major reductions in S02 and NOX emissions from NC’s 14 coal-fired power plants, directed our Division of Air Quality, over a three year period, to study and make recommendations concerning emissions of mercury and carbon dioxide.
As you know, these are important, controversial issues. For example, Donald Kennedy, the Editor of Science, has called climate change “the most serious issue” we face.
Last year, 2003, the Division, working with a broad group of interested parties, put together reports reviewing and summarizing the state of scientific research on mercury and carbon dioxide emissions. This year, 2004, the Division has updated the review of research, and has inventoried options for the recommendations we must make next year (2005). We now ask all interested parties to read this year’s report and give us their views, questions and suggestions about it.
In the upcoming year, as we consider what to recommend, we will evaluate options for action with a number of criteria and principles in mind. As a starting point for those criteria and principles, we plan to use ones suggested in a report of a November, 2003 Aspen Institute policy dialogue chaired by Eileen Claussen and Robert W. Fri. The title of the report is: A Climate Policy Framework: Balancing Policy and Politics. As adapted for use in the task that the General Assembly has given us, the criteria and principles are as follows: iii
1. Environmental effectiveness: How effective is the option in meeting its environmental and public health and welfare target, whether that target is public awareness, information collection and evaluation, or emission reduction?
2. Cost effectiveness: Will the option design allow cost-effective compliance? How will it affect the ability of business to compete?
3. Administrative feasibility: Can the option be administered and does it minimize administrative and transaction costs?
4. Distributional equity: Is the burden of compliance with the option fairly
apportioned?
5. Political acceptability: Are there elements of option design that affect its
political acceptability?
6. Technology development and diffusion: Will the option help provide a platform for technology development and diffusion?
7. Adaptability: Will the option be able to adapt to changing circumstances and incorporate new information?
8. Monitoring and counting: Will the option include things that can be monitored and are verifiable?
9. Encouraging long term success: Will the option encourage long-term progress and success?
As I mentioned above, we invite your input with respect to whether these are the appropriate criteria and principles and how the various options for recommendations come out when judged against the appropriate criteria and principles. Also, we invite you to suggest options that are not in our inventory and to tell us why such options should be considered.
In the interest of giving every citizen of our State, now and in the future, a reasonable opportunity to live a happy, healthy, and prosperous life, we solicit your input and appreciate your help.
iv
Preface
The North Carolina Clean Smokestacks Act (CSA), Session Law 2002-4 (aka Senate Bill 1078), was passed and signed into law in June 2002. This Act’s primary requirements established reductions of SO2 and NOx emissions from coal-fired power plants within the State. There were also two sections of the Act which require the Division of Air Quality (DAQ) to provide reports to the Environmental Management Commission (EMC) and the Environmental Review Commission (ERC) by September of 2003, 2004 and 2005, regarding the effects of these controls on mercury and CO2 emissions. These sections also require DAQ to study and make recommendations to these bodies regarding any further actions needed for these two substances. The first reports (first interim) under this requirement were provided in 2003 and are available from DAQ’s web page on the Internet at http://daq.state.nc.us/news/leg/. A summary of some of the main findings of that report follows this page.
The information in this Second Interim Report on CO2 supplements and updates the information in the September 2003 report and attempts to define a range of options for future consideration (and should not be considered recommendations). Recommendations from DAQ will be addressed in the September 2005 report. The DAQ will continue the stakeholder process through the preparation of that final (September 2005) report. It continues to solicit input from stakeholders and all comments will be seriously considered. However, DAQ recognizes that it is responsible for all final recommendations, and reserves the rights to include, exclude, or revise the final documents to reflect its best judgment of facts, science and objectivity.
DAQ held a public workshop April 19-21, 2004 as a means of soliciting the latest available information, providing a forum for their discussion among stakeholders and others, and to generally exchange ideas on both CO2 and mercury. A wide variety of speakers, many of whom are leading experts in their field, provided presentations. The presentation slides of the main points are provided on DAQ’s web page and listed in Appendix A of this report. To view them, go to: http://daq.state.nc.us/news/leg/cleanst_hg_co_prov.shtml on your web browser and this will link you to those resentations. DAQ recognizes each of these speakers for their work and expresses its appreciation to each of them for their time and efforts to make these presentations and share their expertise.
Please note that in a few cases, text from some public domain (government) references may be repeated verbatim in this report for efficiency, expediency and accuracy. These situations are indicated. The intent is to give proper credit and use only public (copyright unrestricted) sources in these instances. If any errors or deviations to this intent are found, please immediately bring these situations to the attention of the authors. It is not the intent of the authors or DAQ to take credit for the work of others or disregard copyrights.
The authors and editors of this report express their gratitude for all contributors, stakeholders, reviewers and other interested parties who made it possible to produce this work.
v
Selected Conclusion Statements Extracted From First Interim Report
(See 2003 Report for further details at http://daq.state.nc.us/news/leg/ ) 1
• Leading national and international science and governmental authorities, including the current administration, have concluded that man-made emissions contribute to climate change and that it is prudent to take rapid steps to reduce those emissions. The Bush Administration’s “US Climate Action Report 2002”2 accepts and supports the conclusions of the NAS report alluded to above.
• Despite the strong and growing scientific consensus, many still debate the severity of impacts from increased GHG, including CO23, and what should be done in response to rising GHG levels.
• Climate change is a concern at all levels, from local to global, and must be addressed at local, state, regional, national and international levels, with coordinated leadership.
• Options for reducing GHG emissions include conservation, process changes, development and adoption of new technologies and other approaches at all levels of society.
• CO2 is only one of several (usually identified as five major4) greenhouse gases that affect the climate, but the CSA could be interpreted to only address CO2.
• The emissions of CO2 in North Carolina from known sources have been quantified by multiple studies. These studies provide data that are acceptable for purposes of problem assessment. However, for emission trading purposes, the protocols and documentation standards required may cause these estimates to be less than fully adequate.
Other energy savings programs exist that contribute, or have the potential to contribute, to the reduction of GHG emissions. For example, the proposed NC Energy Plan is closely aligned and based on similar principles and objectives.
• Currently, substantial reductions in emissions of CO2 are expected to come from energy efficiency improvements and other measures to reduce fuel consumption, as identified in the State Energy Plan.
• The recognized most effective way to “control” CO2 is to reduce or refrain from burning of carbon-based fuels.
• Scrubbers that control or reduce NOx or SO2 emissions are not effective in significantly reducing CO2 and
• Several DOE (and other) research projects aim to
o increase efficiency of utility boilers
o capture/sequester CO2 from stacks, and
o control these gases by new and innovative methods (such as injection of captured stack effluent into deep underground coal seams or brine pools).
However, these have not yet been proven fully successful or economically viable.
1 North Carolina Division of Air Quality, DENR, CO2 Emission Reduction Options for Coal-fired Electrical Utility boilers and Other Stationary Sources, First Interim Report, September 2003.
2 Climate Action Report, http://yosemite.epa.gov/oar/globalwarming.nsf/content/ResourceCenterPublicationsUSClimateActionReport.html, US Department of State, Washington, DC, May 2002.
3 Status of the Kyoto Protocol; The United Nations Framework Convention on Climate Change, July 2003.
4, US DOE, Energy Information Administration, Washington, DC ,Emissions of Greenhouse Gases in the United States 2001, DOE/EIA-0573, December 2002. vi
Acronyms Used in This Report
AEFL - Amine-Enhanced Flue Lean Gas Reburn
CAA – Clean Air Act – Primary federal statute governing clean air requirements
CAFO – Confined Animal Feeding Operation
CAIR – Clean Air Interstate Rule
CAPA – Clean Air Planning Act – Carper Bill
CCAR – California Climate Action Registry
CCSP – Climate Change Science Program
CEM – Continuous Emission Measurement
CHP – Combined Heat and Power
CO2 – Carbon Dioxide – the major global warming gas
CPA – Clean Power Act - Jeffords-Waxman Bill
CSA – North Carolina Clean Smokestacks Act (See inside cover for full text and title)
CSI – Clear Skies Initiative (or Act) – Proposal for revised CAA legislation by the Bush Administration (also recently referred to as synonymous with the CAIR)
DAQ – North Carolina Division of Air Quality
DENR – NC Department of Environment and Natural Resources
DOA – Department of Agriculture (US or NC)
DOE – The US Department of Energy
EPC – Energy Policy Council
EMC – Environmental Management Commission (NC)
EPICI – Electric Power Industry Climate Initiative
ERC – Environmental Review Commission (NC)
EPA – US Environmental Protection Agency
GHG – Greenhouse Gas(es)
GWP – Global Warming Potential
HFC’s - Hydroflurocarbons
HVAC – High Volume Air Conditioning
IGCC – Integrated Gasification Combined Cycle
IPCC - Intergovernmental Panel on Climate Change, international authority on climate change
kWh – Kilowatt hour (1000 watts for one hour)
LNB – Low NOx Burner
LoGESO – Local Government Energy Savings Organization
NAAQS – National Ambient Air Quality Standards
NAS - National Academy of Science
NASA – National Air and Space Administration
NASEO – National Association of State Energy Officials
NC – North Carolina
NCCA – North Carolina Climate Action (Registry)
NCSU – North Carolina State University
NESCAUM - Northeast States for Coordinated Air Use Management
NHCPS – New Hampshire Clean Power Strategy
NSF – National Science Foundation
MOU – Memorandum of Understanding
vii
MW – Mega-watt; millions of watts
NOAA – National Aeronautics and Space Administration
NOx – Oxides of Nitrogen, including NO2, the primary nitrogen species from combustion
OFA – Overfire Air
PFC’s - Perfluorocarbons
PTC – Production Tax credit
RGGI – Regional Greenhouse Gas Initiative (NESCAUM)
ROFA – Rotating Opposed-Fired Air
ROTAMIX – Injection of Ammonia to further reduce NOx (Used in combination with ROFA)
RPS – Renewable Portfolio Standard
SCR – Selective Catalytic Reduction
SCRUB – Wet scrubber for SOx
SEO – State Energy Office of NC
SEP – State Energy Plan of NC
SNCR – Selective Non-Catalytic Reduction
SO2 – Sulfur Dioxide
SOx – Oxides of Sulfur, including SO2, the primary combustion product of sulfur
SUV – Sport Utility Vehicle
TFS2000 – Combination Low-NOx Burner/Overfire Air
tpd – tons per day
UNFCCC - United Nations Framework Convention on Climate Change
WIR - Underfire Air viii
Table of Contents
The Requirement: Excerpted from the Act..................................................................i
An Invitation from Secretary Ross............................................................................iii
Preface........................................................................................................................v
Selected Conclusion Statements Extracted From First Interim Report.................vi
Acronyms Used in This Report.................................................................................vii
Chapter I Executive Summary................................................................................I-1
Introduction...............................................................................................................I-1
Main Findings in This Second(2004) Interim Report:..............................................I-1
Potential Option Levels for Satisfying the CSA Requirements................................I-3
Some Candidate Actions to Achieve the Major Options Outlined Above:..........I-4
Chapter II Background - North Carolina’s CSA And Climate Change............II-1
Pollutant Definitions and Other Terminology........................................................II-1
Review of Concerns About Global Warming and Climate Change.......................II-2
Review of Sources of CO in the U.S. and in North Carolina2................................II-4
Weather and Climate Trends in the Southeast....................................................II-9
North Carolina Climate and Perspectives...........................................................II-9
Chapter III Impacts And Economics of Climate Change..................................III-1
A Backdrop of Growth in Southeastern States......................................................III-1
Projected Climate Change Impacts........................................................................III-1
Potential Economic Impacts Associated with Climate Inaction............................III-2
Weather-related Stresses on Human Populations..............................................III-3
Climate Change Effects Projected for Southeastern Forests.............................III-4
Background on Emissions Trading Programs........................................................III-4
The Currency of a Carbon Market: Carbon Credit$..........................................III-5
Potential Cost Scenarios....................................................................................III-6
Chapter IV Reduction and Sequestration Technologies and Options...............IV-1
Energy Efficiency : Use Less - The State Energy Plan.........................................IV-3
Programs to Directly Increase Energy Efficiency at Generation Units.............IV-4
State Agencies, Local Governments, Schools & NPOs.....................................IV-4
Commercial/Industrial.......................................................................................IV-5
Residential..........................................................................................................IV-6
Renewable Energy (Substitution for Fossil Fuels – Also Addressed in SEP).......IV-7
Solar:..................................................................................................................IV-7
Wind/Substitution..............................................................................................IV-8
Hydroelectric/Substitution.................................................................................IV-9
Biomass Burning/Substitution.........................................................................IV-10
Capture and Use of Underutilized Energy Sources/Substitution.....................IV-12
Post-Emission Capture and Sequestration...........................................................IV-13
Agricultural and Forest Sequestration.............................................................IV-13
Carbon Storage Trends for North Carolina’s Forests:.............................IV-14
ix
Complexity of Carbon Sequestration.......................................................IV-14
Recent Developments in Georgia and California....................................IV-16
Creating an Effective Carbon Storage and Sequestration Program.........IV-17
End-of-Pipe Hardware/Technologies...................................................................IV-18
CO Capture Options2.......................................................................................IV-18
Conventional Amine Absorption.............................................................IV-18
Advanced Amine Absorption..................................................................IV-19
Gas Separation Membranes.....................................................................IV-19
Temperature Swing Adsorption...............................................................IV-19
Regenerable CO Sorbents2.......................................................................IV-19
Geological Sequestration.................................................................................IV-20
Other Technologies and Emerging Options.........................................................IV-21
Conversion of Coal Units to Gas Units............................................................IV-21
Coal Gasification.............................................................................................IV-21
Environmental Benefits of Gasification...................................................IV-22
Efficiency Benefits...................................................................................IV-23
Carbon Capture........................................................................................IV-24
Combined Cycle Turbines...............................................................................IV-24
Distributed Generation.....................................................................................IV-24
Hydrogen Fuels & Fuel Cells..........................................................................IV-25
Recovery of Fuel Value from Animal Waste at CAFOs.................................IV-26
Nuclear Power..................................................................................................IV-27
Industrial Initiatives.............................................................................................IV-27
Other Potential Policy Options for North Carolina..............................................IV-28
Renewables Portfolio Standards:.....................................................................IV-28
Net-Metering....................................................................................................IV-29
NC Climate Action Registry............................................................................IV-30
Chapter V What Are Others Doing.......................................................................V-1
Update on International Developments..................................................................V-1
Federal Actions and Status......................................................................................V-1
State and Regional Activities..................................................................................V-3
Option for Joint Actions Harmonizing With Other States......................................V-4
APPENDIX A April 19-21, 2004 DAQ Workshop Presentations (CO Only) Titles, Speaker Names and Affiliation2.......................................................................................A-1
Monday, April 19 Opening Session........................................................................A-1
Basis for Issues to be Discussed: CO 2 and Mercury:........................................A-1
Lunch Speaker - Importance and Impacts of CSA Sections 12 and 13 and Your Input for the Future of North Carolina: Secretary William (Bill) Ross, NC Department of Environmental and Natural Resources.......................................A-1
Tuesday, April 20....................................................................................................A-1
Lunch Speakers...................................................................................................A-1
Mercury and COEmissions from the Power Generation Sector : Dr. C.V. Mathai, Manager for Environmental Policy, Arizona Public Service Company, Phoenix, AZ2 ...............................................................................A-1
x
Insights from Economic Analyses of the Impacts to the Utility Industry from Mercury and COControls: Dr. Anne E. Smith, Vice President, Charles River Associates, Washington, DC2 ...............................................A-1
General CO Topics and Issues:2.........................................................................A-1
Wednesday, April 21 : NC Specific CO 2 Topics and Issues–...........................A-2
Lunch speaker – Herding Sheep: The Commons and the Marketplace; Michael Shore, Environmental Defense...........................................................................A-2
Summaries:.................................................................................................A-3
APPENDIX B Summary of Recent International, Federal, Regional, State and Local Actions Related to Climate Change................................................................................B-1
International Actions, Treaties and Negotiations:..................................................B-1
Framework Convention on Climate Change (Rio Climate Treaty)....................B-1
Kyoto Protocol....................................................................................................B-1
G-8 Renewable Energy Initiative........................................................................B-2
Small Island States Clean Energy Initiative........................................................B-2
Iceland's Effort to Become First Hydrogen Based National Economy..............B-2
Federal Actions from the 108 Congress Relative to Climate ChangeTH.................B-3
Greenhouse Gas Reduction.................................................................................B-4
Greenhouse Gas Reporting.................................................................................B-4
International Negotiations...................................................................................B-5
Energy Policy......................................................................................................B-6
Appropriations....................................................................................................B-7
Power Plants........................................................................................................B-8
Transportation.....................................................................................................B-9
Hydrogen...........................................................................................................B-10
Clean Coal.........................................................................................................B-10
Carbon Sequestration, Genomes.......................................................................B-11
Climate Science................................................................................................B-11
State, Regional, Local and Private........................................................................B-12
Regional Activities............................................................................................B-12
State Legislation and Programs........................................................................B-12
City and Community Efforts and Commitments:.............................................B-13
Private and Corporate Targets and Achievements:...............................................B-14
APPENDIX C Draft Plan for A North Carolina Climate Action Registry....................C-1
Background.............................................................................................................C-1
Summary of NC and Federal Historical Activities.............................................C-1
Sources and Emissions in North Carolina..........................................................C-2
U.S. DOE and U.S. EPA Registries and Related Programs...............................C-3
US DOE 1605 (b)........................................................................................C-3
US EPA Climate Leaders............................................................................C-4
EPA’s Acid Rain Reporting........................................................................C-4
Climate Wise in NC....................................................................................C-5
Climate Leaders in NC................................................................................C-5
Climate Vision in NC..................................................................................C-6
xi
Environmental Performance Track.............................................................C-6
NC Environmental Stewardship Initiative..................................................C-6
State Energy Plan Interfaces.......................................................................C-7
Previous NC Legislative Involvement and Analysis of Proposals.....................C-7
Range of DAQ Options and Concerns/Issues for Planning a NC Registry............C-8
Overview/Introduction................................................................................C-8
Basis for Program to Fit Needs/Requirements............................................C-9
Options Assessed......................................................................................C-10
Minimal Effort-Low Benefit.................................................................C-10
Intermediate Commitment Option – Limited Benefits.........................C-10
Major Stand-alone Program – High Costs but Higher Benefits...........C-11
A Sensible Skeleton for Building a NC Registry..................................................C-13
Element 1: Encourage Interfaces with DOE, EPA and Other agencies.............C-13
Element 2: Informal “Registration” of GHG via Existing Procedures.............C-13
Element 3: A Program to Encourage and Facilitate Voluntary Reporting.......C-14
Element 4: Harmony With State/Regional/Federal/International Aspects.......C-15
Environmental Stewardship Initiative.......................................................C-15
Continue Support and Participation for Existing State/Federal ProgramsC-15
Joint DAQ Efforts With DPPEA and other State Offices in NC..............C-15
Coordination and Harmonization with State Energy Plan Objectives......C-16
Promotion/Assistance & Education Efforts..............................................C-16
Element 5: Update the GHG emissions inventory for the State.......................C-16
Element 6: NC DAQ Coordination with other (Outside NC) State Programs.C-17
Southeastern States and Other Atlantic/Gulf Coast States.......................C-17
NESCAUM...............................................................................................C-17
California..................................................................................................C-18
Other Legislative Interactions & Expectations Relative to This Proposal...........C-18
Potential Comprehensive GHG Mitigation Plan for North Carolina....................C-18
Summary of Needs for a Practical Level of a Climate Action Registry in NC....C-19
APPENDIX D EPC-Recommended Action Items from the North Carolina State Energy Plan (2003)......................................................................................................................D-1
Energy, Economic, and Environmental Issues.......................................................D-1
Alternative Fuels from Biomass.............................................................................D-1
Alternative Energy Sources....................................................................................D-2
Energy Use in the Public Sector.............................................................................D-2
Energy Use in the Residential Sector......................................................................D-3
List of all 93 action items from the North Carolina State Energy Plan 2003.........D-3
Policies and Programs for Energy and the Environment....................................D-3
Energy Supply Policies and Programs................................................................D-3
Electric Utility Policies and Programs................................................................D-4
Alternative Fuels Policies and Programs................................................................D-4
Alternative and Renewable Energy Policies...........................................................D-5
Public Sector Recommended Policies and Programs.........................................D-6
Residential Energy Policies and Programs.........................................................D-7
Commercial Energy Policies and Programs.......................................................D-9
xii
Industrial Energy Policies and Programs............................................................D-9
Transportation Energy Policies and Programs..................................................D-11
Energy Education and Research Policies and Programs...................................D-12
Funding Energy Policies and Programs............................................................D-14
APPENDIX E Bibliography...........................................................................................E-1
Author Credited Documents (by author’s last name)..............................................E-1
Organizational References (author not specified – by organization name).............E-5
xiii
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xiv
CHAPTER I EXECUTIVE SUMMARY
Introduction
The Clean Smokestacks Act (CSA) was passed and signed into law in June of 2002 by the North Carolina General Assembly and Governor Easley, respectively. This Act requires the Division of Air Quality (DAQ) to complete studies and make specific recommendations to the North Carolina Environmental Management Commission (EMC) and the North Carolina Environmental Review Commission (ERC) by September of 2003, 2004 and 2005 regarding CO2 emissions from coal-fired power plants and other stationary sources. DAQ provided the First Interim Report to these two bodies in September of 2003. This Second Interim Report updates, and expands upon, the information presented in that report and begins to outline options that might be considered for recommendations in the 2005 report. Much of the information presented in this report was gained through additional literature searches and reviews and from information presented in a workshop held with stakeholders, national experts and interested parties in April 2004 (See Appendix A). DAQ continues to be open to new ideas and solicits your continuing input.
This Executive Summary is intended to list and highlight the range of options available from which to develop possible recommendations from which to choose for inclusion in the final report in 2005. This report does not make such choices this time. The process for reaching these decisions will include a continuing stakeholder process, expected to be reconvened in the spring of 2005. The remainder of this report provides additional discussion, details and highlights of options available. The intent is for the reader to use this Executive Summary to identify options and areas that they may wish to explore in more detail in other Chapters.
Main Findings in This Second(2004) Interim Report:
Some main points or findings summarized in this report are:
• According to the EPA, North Carolina ranks 14th among the states in total CO2 emissions.5
• Our state’s CO2 output has grown steadily along with rises in energy consumption, increasing by more than 30 percent since 1990.6
• Currently more than 70 percent of North Carolina’s energy comes from fossil fuels7, and
• Residential energy consumption is expected to increase by about 50 percent by 2020.8
• Other GHG continue to be considered important in addition to CO2.
• “End of Stack” solutions are not viable and practical for removal of CO2 from stacks of power plants or other stationary sources at this time, but may be available over a longer term of several years.
• Costs of inaction to address climate change for North Carolina are projected by scientists and many others to be significant.
5 US EPA, States Ranked By Total Carbon Dioxide Emissions, http://yosemite.epa.gov/globalwarming%5Cghg.nsf/EIAStatesRankedbyTotalEmissionsAll?openview&count=52.
6 US EPA, http://yosemite.epa.gov/oar/globalwarming.nsf/content/EmissionsStateEnergyCO2Inventories.html.
7 Energy Information Administration, Department of Energy, Energy Expenditures in North Carolina, 1999; State Energy Profile, www.eia.doe.gov/emeu/sep/nc/frame.html.
8 North Carolina Energy Division, North Carolina Energy Outlook, 2003, Appendix Table, p. 92. Increase estimated from a 2000 baseline. I-1
• A number of other states continue to take action on climate change in the absence of federal legislation. However, as this document was being finalized, the Bush administration made announcements regarding new affirmation that man’s actions are definitely a part of the global climate change problem and that increased efforts to make reductions are appropriate. This announcement may spur new federal actions.
• There are potential benefits to various sectors of North Carolina’s economy if the State is adequately prepared for the potential carbon marketplace, subject to the timing and structure of national carbon caps.
• There are also significant potential economic paybacks for non-utility sectors of the economy. Investments in development of an infrastructure to reduce carbon combustion (and other GHG equivalents) in other sectors will also help to assure that North Carolina is a leader in development and manufacture of new technologies. In so doing, industry and other institutions can be prepared to provide research, equipment, expertise and services to facilitate these needed changes occurring state-wide, nationally and globally.
• It is likely feasible to take positive actions to develop North Carolina procedures and processes that will result in a climate change registry process whereby the State will become part of a global solution with relatively minor impact upon public resources.
• Efforts and developments in the national, regional state and global arenas continue, (almost daily) and will necessarily influence choices of the next best and sensible steps for North Carolina.
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Potential Option Levels for Satisfying the CSA Requirements
In light of the global and national momentum, and because of the risks and opportunities climate change poses for our state, many are convinced that North Carolina must prepare its economy and its people for a carbon-constrained world. Carbon dioxide and other greenhouse gas (GHG) emissions can be reduced by an array of solutions, including end-of-pipe technologies (now being researched), increased energy efficiency (such as encouraged in the State Energy Plan), greater use of renewable energy, carbon sequestration in trees and agricultural lands and incentives for lower emitting vehicles. Many of these steps can be implemented now. Some may need to be addressed later. Some solutions will likely need to be accomplished by adoption of new governmental policies; some with new State rules based on existing authorities, and others may require new legislation. Policy and legislative changes that are under consideration for the U.S Congress nationally will also likely have important impacts on efforts and steps in North Carolina, especially as needed to avoid redundancy and confusion.
This second interim report examines a wide range of options for reducing our State’s GHG emissions and working with others to reduce the U.S. and global emissions. This report is thus intended to serve as an information source to aid DAQ, and stakeholders in developing recommendations for the North Carolina ERC and the EMC, as required by the CSA. Following submittal of this second interim report, the Division will begin developing an initial draft final report outlining proposed recommendations for North Carolina. That draft report is expected to be ready to begin stakeholder review by Spring 2005. Final revisions of that report, including final recommendations, will then follow by September 2005. The final recommendations will likely be developed from the list of options, or combinations thereof highlighted below, under five main groupings:
A. Take no action and default to potential federal and international actions to address the problem of requiring and defining means to achieve “CO2 controls” (i.e. reductions) at some undetermined time in the future.
B. Commit to future actions, but only after further studies. This option would require the State to first undertake and complete additional studies and pursue more detailed analyses (requires new funding and other resources) involving multiple State agencies and academic institutions to further refine the options and actions.
C. Take a moderately more aggressive approach of accounting and reductions that would be designed with a combination of voluntary and required steps to maximize reductions in GHG, in conjunction with energy efficiency measures that result in a minimum of cost impacts.
D. Develop aggressive plans and take actions to set a cap on all GHG emissions; with reference and focus toward CO2 from coal fired boilers, other stationary sources (combustion-centered, primarily) and transportation sources. This option would involve a significant mandatory reporting and accounting system to would guarantee that North Carolina does its share of leading and attainment of international goals, using established national and internationally accredited protocols and data storage capabilities. I-3
E. A combination of either, or both, of the two previous options, but developed and implemented as part of an integrated multi-state energy and carbon emission reduction (Climate Action) plan.
Some Candidate Actions to Achieve the Major Options Outlined Above:
The items listed below is not necessarily complete, but helps define a range of actions and programs that may be considered for components of the larger overall options outlined above to develop the final recommendations for September 2005:
1. Develop/implement caps for reducing emissions all GHG pollutants (expressed in carbon equivalents) from all major sectors in the State
2. Develop/implement requirements for improved fuel mileage from motor vehicles owned both by the State and by the public
3. Institute a program and target for across the board reductions in use of energy use by State government in North Carolina, with credits for these reductions being quantified and used for possible “cap and trade” programs within the State
4. Initiate a program and policy resulting in an incremental movement toward shifting all electricity purchased by the State government to be through the NC GreenPower renewable resources program
5. Develop and incorporate applicable GHG-friendly policies and requirements in to the State Implementation Plan revisions for ozone and particulate matter (PM 2.5) to the maximum level that is feasible
6. Develop processes and policies to implement new technologies such as IGCC at the earliest possible stage to maximize reductions and maximize efficiencies over the longer term, especially before anticipated replacement of existing power generation capacity in North Carolina
7. Develop/implement a meaningful and detailed emission registration requirement, eventually with third party verification and salable and tradable carbon credits, including strict tracking and accounting of all areas covered by the State Energy Plan, and including consideration for a sector for quantifying natural emissions
8. Develop policies, incentives and systems/programs to encourage complete conversion for using waste from animal operations to its maximum as an energy resource
9. Develop/implement innovative policies that encourage reductions in utility generation and emissions while providing incentives for utility companies to endorse and aggressively assist in achieving such reductions.
10. Maximize the application and effects of the State Energy Plan with tracking of each sector
11. Develop more extensive plans, policies and incentives for use of forest resources for sequestration and for renewable energy (while avoiding double counting)
12. Revisions in net metering limitations and support of passage of new net metering laws
13. Expand study and potential development of renewable and non emitting energy sources and policies related thereto for such categories as:
a. NC GreenPower in both private and government sectors
b. Solar
c. Wind and “geo-power”
d. Bio fuels, etc.
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14. Develop and participate in implementation of significant multi-state energy and carbon emission reduction (Climate Action) plans, involving stakeholder processes where possible
15. Fund and otherwise encourage programs at North Carolina universities to develop energy efficient and carbon-minimized technologies for North Carolina and world markets
16. Aggressively pursue development and nurturing of energy and carbon minimization technology research and manufacturing developments, along with promoting these research programs and manufacturing industries in the state
17. Develop a North Carolina Climate Action Registry that involves mandatory reporting and targets, recognizes existing reporting avenues, and includes reporting by the State sources, all using State guidance and requirements for submittals, but with the DOE 1605 (b) registry being the depository (with a minimal reporting requirement for largest sources only – not geared toward a “State-run” trading system)
18. Develop a basis for an emission credits (trading) program to be administered by private sector resources and motivation
19. Develop further options and plans to integrate IGCC technologies into future planning for energy generation in the state with a future option for geological sequestration
20. Make major recommendations to the North Carolina General Assembly regarding how to potentially alter the utility planning process to allow or provide for earlier input with the earliest possible identification of opportunities for potential encouragement or requirement of new technologies
21. And other similar policies and processes that may be identified.
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If a man will begin with certainties, he shall end in doubts, but if he will be content to begin with doubts, he shall end in certainties. - Sir Frances Bacon
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CHAPTER II BACKGROUND - NORTH CAROLINA’S CSAAND CLIMATE CHANGE
The text of the Clean Smokestacks Act (CSA) Section 13 appears on the inside of the cover page of this report, for convenience. The reader may also wish to review the First Interim Report (September 2003) or the summary on page v of this report, for further background and “state of the science” discussions not repeated in this report.
Pollutant Definitions and Other Terminology
The text of the CSA directs the Division to study CO2, which is by mass or volume, the largest quantity of greenhouse gas (GHG) emitted by coal-fired utilities. It is also the largest effective component of the inventory of GHG emitted from all sources. However, as discussed in the First Interim Report other GHG, such as methane, N2O, halocarbons, and others exist throughout the atmosphere and are contributory to warming of the oceans and Earth’s atmosphere, with substantially more “warming effectiveness” per molecule than CO2. For example, methane is 21 times more “potent” than CO2. Other major contributors to atmospheric warming often overlooked and not addressed in these discussions are water vapor and particulate matter. Recent information provides evidence that “black carbon” particulate matter and nitrogen oxides, such as emitted from diesel vehicles, make significant contributors to climate change.9 The Intergovernmental Panel on Climate Change (IPCC)10 suggests that the effects of one ton of black carbon could equal that of about 200 to 600 tons of carbon dioxide when translated to temperature impacts. Although this document uses other GHG terms in places, the distinct identity and focus on CO2 has also been retained for reference and completeness. Figure II-1 provides a pictorial representation of the relative impact of the various major GHG.
Figure II - 111
9 J. E. Hansen and Miki, Sato. Trends of measured climate forcing agents. Proc. Natl. Acad. Sci. 98, 14778-14783, 2001
10 Intergovernmental Panel on Climate Change, Climate Change 2001: The Scientific Basis, http://www.grida.no/climate/ipcc_tar/wg1/
11 James E. Hansen, Climate Forcings, 1850 – Present, Scientific American, March 2004. II-1
A related terminology question also exists regarding global warming gases, GHG or “climate change gases.” The terms are sometimes used almost interchangeably though there are variations in meaning. [“Climate change” specifically refers to changes in long-term trends in the average climate, such as changes in average temperatures. Depending on usage, it may mean changes due to natural factors and variability, or as a result of human activity. “Global Warming” refers to the progressive gradual rise of the Earth's average surface temperature thought to be caused, in part, by increased concentrations of GHG in the atmosphere.]12 In this document, we use the term “GHG” for convenience, though the more applicable term might be “Climate Change Gases.”
In most sections, the CSA is specifically applicable to coal fired power plants. However, in the language of Section 13, the scope includes “other stationary sources.” Therefore, the scope of this report and study effort is not limited solely to the utility industry and discussions refer to other major sources generating GHG, such as motor vehicles (which, of course, are not stationary).
Review of Concerns About Global Warming and Climate Change
As was stated in the First Interim Report, evidence has been accumulating that the Earth is warming and that this warming is occurring in close parallel to the levels of CO2 in the atmosphere.13. Man made emissions of CO2 have been increasing at a significant rate since the Industrial Revolution when the combustion of fossil fuels and other carbon fuels began to accelerate at a very rapid rate. Recent measurements show that atmospheric concentrations of CO2 have been rising, and continue to rise at a rapid rate. Figure II-2 shows a plot of actual ambient concentrations of CO2 at one of the most representative sites in the world at a high elevation in Hawaii. Similar relationships have been established with levels of CO2 and temperature, as discussed in the First Interim Report.
Internationally, scientists have been discussing the growth of the CO2 and other GHG in the atmosphere for many years and have been drawn into two camps regarding the effects of man made changes to a historic cycle of global warming and cooling. Various international scientific bodies and the National Academy of Sciences have concluded however, that the concerns for the impact of man-made emissions are warranted and that governments must take immediate actions to reduce these emissions. We must consider both the shorter term and the long term impacts of our actions and practices. These concerns and considerations have prompted efforts all over the globe to do something but it has not been well coordinated or orchestrated for these actions to be universal and consistent. It is likely that a leadership role by North Carolina could help make a transition to a more aggressive set of reduction policies and actions, albeit not necessarily focused exclusively on the coal-fired electric power generation units. Even as this document was being prepared for final publication, the President announced additional information and agreement among scientists that man’s role in the climate change phenomenon must be revised and further steps taken to mitigate the
12 The Pew Climate Change Center, Global Warming Basics, http://www.pewclimate.org/global-warming-basics/
13Wiley Barbour, History and Transitions of Global Warming Programs and Policies, Environmental Resources Trust, Inc., NC DAQ CO2 and Mercury Workshop, Raleigh, NC, April 19, 2004 (See Appendix A). II-2
emissions of GHG.14 In addition, new reports out of Europe have also defined more evidence of the changes taking place there and around the globe.15
Figure II-2
Atmospheric CO2 Measurements from Mauna Loa Observatory (Since 1958)
A article by Leonard David, Senior Space Writer with NASA, recently summarized and commented on a National Research Council report: "Abrupt climate changes in the last few thousand years generally have been less severe and affected smaller areas than some of the changes further back in the past. Nonetheless, evidence shows that rapid climate changes have affected societies and ecosystems substantially, especially when the changes that brought persistent droughts occurred in regions with human settlements, there is no reason to believe that abrupt climate changes will not occur again.”16 The NRC report also underscored the importance of not being fatalistic about the threats posed by abrupt climate change. “Societies have faced both gradual and abrupt climate changes for millennia and have learned to adapt through various mechanisms, such as moving indoors, developing irrigation for crops, and migrating away from inhospitable regions." The study group added: "Nevertheless, because climate change is likely to continue and may even accelerate in the coming decades, denying the likelihood or downplaying the relevance of past abrupt changes could be costly. Societies can take steps to face the potential for abrupt climate change."17 Figure II-3 below (also see
14 U.S. Climate Change Science Program, Our Changing Planet; a Report by the Climate Change Science Program and the Subcommittee on Global Change Research, Washington, DC, July 2004.
15 European Environment Agency, Impacts of Europe's changing climate, August 18, 2004. http://reports.eea.eu.int/climate_report_2_2004/en/tab_abstract_RLR
16 Leonard David, Senior Space Writer, NASA, June 2004, http://www.space.com/scienceastronomy/geoengineering_040601.html
17 Ibid. II-3
similar graph on cover), produced by NASA,18 provides convincing evidence that the global temperature is increasing, even though the increments of change may seem small.
Figure II – 3 Global Temperature Plot 1880-2000
Eileen Claussen, President of the Pew Center on Global Climate Change, recently gave a talk on “Global Climate Change and Coal’s Future.” In this talk, she said “Warming by itself, of course, is not proof of global warming. Climate conditions vary naturally, as we all know, and I am sure you have heard arguments that such natural variability, whether caused by volcanoes or the sun, can account for the climate change we’ve seen in recent decades. But when scientists actually take a look at the relative importance of natural vs. human influences on the climate, they consistently come to the same conclusion. And that is this: observed climate change, particularly that of the past 30 years, is outside the bounds of natural variability. Atmospheric concentrations of carbon dioxide are more than 30 percent higher now than they were just a century ago. Despite what you may hear, this increase in carbon dioxide is undeniably human in origin, and it is the only way to explain the recent trends in the global climate.”
Review of Sources of CO2 in the U.S. and in North Carolina
For about a thousand years before the Industrial Revolution, the amount of greenhouse gases in the atmosphere remained relatively constant. Since then, the concentration of various greenhouse gases has increased dramatically. The amount of CO2, for example, has increased by more than 30 percent since pre-industrial times and is still increasing at a rate of about 0.4 percent per year, mainly due to the combustion of fossil fuels and deforestation. Although natural emissions of CO2 are significant, we know that this increase is anthropogenic because the changing isotopic composition of the atmospheric CO2 betrays the fossil origin of the
18 National Aeronautics and Space Administration, Goddard Institute for Space Studies, Global Temperature Trends: 2002 Summation, 2004. http://www.giss.nasa.gov/research/observe/surftemp/ II-4
increase. The concentrations of other natural radiatively active atmospheric components, such as methane and nitrous oxide (N2O), are increasing due to agricultural, industrial and other activities. The concentrations of other nitrogen oxides (NO and NO2) and of carbon monoxide (CO) are also increasing. Although the latter gases are not directly identified normally as GHG, they play an important role in atmospheric chemistry and GHG concentrations.19
Nationally, man-made emissions of GHG continue to grow, in spite of efforts and rhetoric to the contrary20 (with residential leading the way with a 2.5 % annual growth in emissions). Although Duke Energy and Progress Energy, and other participants in voluntary GHG reduction programs, have proactively reduced their emissions substantially (from what they “would have been”), and are contributing to known reduction scenarios of over 266 tons/year,21 these reductions do not offset growth. It is obvious that the reduction of statewide emissions in North Carolina will require actions for both transportation and electric generation and other sectors, to achieve success in reversing the slope of the North Carolina emissions trend line. Even then, it is important that the rest of the world follow the same pathways. Due to the large rates of growth of GHG emissions, immediate reductions to former “base case” conditions are not possible without application of new technologies or serious efforts to curtail the consumption (combustion) of fossil fuels. Other sources alone would not be able to achieve reductions on the order needed to reverse the growth trend to the level of 1990 or some earlier date or benchmark. To further exacerbate the situation, countries such as China are growing very rapidly and increasing their usage of, and emissions from, fossil fuels at a very rapid pace and their emissions contribute equally to global increases on a molecule by molecule basis.
Two of the largest source categories of man-made CO2 in North Carolina are also coal fired power plants and transportation (automobiles, trucks, etc).22 These two categories each make up in the neighborhood of 30 per cent of the total anthropogenic emissions, and both continue to grow.23
According to a recently released report from the DOE, U.S. energy-related CO2 emissions in 2003 were up 0.9 percent from 2002 levels - from 5,736 to 5,788 million metric tons (MMT) of CO2. Between 2002 and 2003, energy demand rose by 0.6 percent because high natural gas prices in 2003 resulted in a shift to higher carbon fuels, such as coal and petroleum, and a colder winter than the previous year, with a 3.8-percent increase in heating degree days, required more fuel (primarily natural gas) for home heating. CO2 emissions in 2003 were below the 2000 level having fallen in 2001 by 1.8 percent and having grown by only 0.8 percent in 2002. 24
19 Intergovernmental Panel on Climate Change (IPCC), Climate Change 2001:Working Group I: The Scientific Basis, 2001, http://www.grida.no/climate/ipcc_tar/wg1/index.htm .
20 Andrew Freedman, Greenwire - EIA Report,, U.S. CO2 Emissions Continue Rise on Strong Residential Growth , July 2, 2004.
21The Center for Energy and Economic Development (CEED), NC DENR Interim Report on CO2 - Comments, August 2004.
22 North Carolina State Energy Plan, June, 2003, http://www.energync.net/State%20Energy%20Plan%2003.pdf .
23 Appalachian State University , Department of Geography and Planning, North Carolina’s $ensible Greenhouse Gas Reduction $trategies, Boone, NC 28608, January 2000, http://www.geo.appstate.edu .
24 U.S. Department of Energy, Energy Information Administration, Office of Integrated Analysis & F orecasting, U.S. Carbon Dioxide Emissions from Energy Sources 2003 Flash Estimate, June 2004, http://www.eia.doe.gov/oiaf/1605/flash/flash.html II-5
Figures II-4 and II-5 from the State Energy Plan provide graphic presentations of the distribution of energy consumption in North Carolina.
Figure II-4: Figure II-5 25
U.S. Energy-Related Carbon Dioxide Emissions
This report also shows that while coal produces the most CO2 per unit of energy, petroleum produces a greater portion of the U.S. CO2 emissions due to its larger consumption levels (transportation is a major component). Annual emissions growth from petroleum sources averaged 1.1 percent (1990 to 2003), annual emissions growth averaged 1.3 percent from coal and 1.0 percent from natural gas. In 1999, transportation-related CO2 emissions overtook industrial emissions and remain the largest source of energy-related CO2. Between 2002 and 2003, transportation CO2 emissions grew 0.5 percent. Gasoline demand was up 1 percent, but a 35-percent increase in ethanol consumption helped to moderate direct emissions in the transportation sector. Between 1990 and 2003, transportation CO2 emissions grew 19 percent (1.3 percent per year). Between 1990 and 2002, highway vehicle miles traveled grew by 32 percent (2.4 percent per year).
Between 2002 and 2003, residential CO2 emissions grew by 2.5 percent as housing stock was up by 1.1 percent and heating degree-days were up by 3.8 percent. Between 1990 and 2003, residential sector CO2 emissions grew by 28 percent (1.9 percent per year).
25 North Carolina State Energy Plan, June, 2003, http://www.energync.net/State%20Energy%20Plan%2003.pdf .
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This increase was driven by population growth of 17 percent (1.2 percent per year) and residential electricity demand growth of 39 percent (2.6 percent per year).
Between 2002 and 2003, CO2 emissions from the commercial sector grew 1.3 percent as the economy grew by 3.1 percent and commercial employment rose 0.3 percent. Between 2002 and 2003, commercial sector electricity sales rose 0.4 percent, but CO2 emissions rose 1.3 percent due to the higher carbon intensity of generation. Between 1990 and 2003, commercial sector CO2 emissions grew by 33 percent (2.2 percent per year). This increase was driven by commercial sector employment growth of 32 percent (2.1percent per year) and commercial sector electricity sales growth of 46 percent (2.9 percent per year), again as stated in the DOE report referenced.
Between 2002 and 2003, industrial energy-related CO2 emissions were unchanged; the index of total industrial output increased by only 0.2 percent. Between 1990 and 2003, energy-related industrial sector CO2 emissions declined by 0.9 percent (-0.1 percent per year), while total industrial output grew by 44 percent and manufacturing output grew by 53 percent. By 2003, energy-intensive primary metals output was 1 percent below 1990 levels, while basic chemicals output was 6 percent below 1990 levels.
The energy quandary, as summarized by Eileen Claussen of the Pew Center for Global Climate Change in a recent speech, boils down to three questions. The first is energy supply (and therefore security) - can we find enough energy to meet our needs from sources that are secure? The second issue is climate change - can we provide the energy we need in ways that do not harm the climate? Last, but not least is the issue of cost or price - can we meet our energy needs in affordable ways that will allow us to continue to grow our economy? Looking across these three issues, it is clear that we need a climate-friendly energy policy on the one hand and an economy-friendly climate policy on the other. Some elements of these policies will be the same, but the important point is that we need to think broadly about how best to achieve the related goals of protecting the climate and meeting America’s energy needs affordably in the decades ahead.26
For the electric generation sector, despite a 0.2 percent decline in generation, emissions increased by 44 MMT of CO2 (2.0 percent) in 2003. Higher natural gas prices caused generators to switch to other, higher carbon fuels. Coal-powered emissions increased by 64 MMT (3.5 percent), while emissions from petroleum increased by 19 MMT (24.7 percent), and natural gas-powered emissions fell by 39 MMT (12.8 percent).
Of course, national statistics and conclusions do not translate on a one to one basis with the specifics for North Carolina, but the general trend and inclinations are similar. The emissions in the country as a whole affect the situation and conditions in North Carolina and the rest of the globe, though not necessarily on a straight line relationship. Figure II-
26 Eileen Claussen, Pew Center on Global Climate Change, Energy Efficiency, Climate Change and Our Nation’s Energy Future, June 16, 2004, Washington, D.C. II-7
6 illustrates the relative importance of electric power to total CO2 emissions in the U.S. Figure II-727 summarizes the overall fuel use trends for the U.S.
Figure II-6.
27 U.S. Department of Energy, Energy Information Administration, Office of Integrated Analysis & Forecasting, U.S. Carbon Dioxide Emissions from Energy Sources- 2003 Flash Estimate, June 2004, http://www.eia.doe.gov/oiaf/1605/flash/flash.html
Figure II-7
Change in Electric Power CO2 Emissions by Fuel for the Total Power Sector, 2002 to 2003 in Million Metric Tons of CO2-60-40-20020406080CoalNatural GasPetroleum PowerSector Total
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Weather and Climate Trends in the Southeast
Many climate changes have occurred over geologic history. Evidence of these trends exists in ice cores and other tools used by scientists to look back into the past. Analyses of recent data have shown28 that temperature trends in the Southeast vary between decades, with a warm period during the 1920s through1940s, followed by a cooling trend through the 1960s. According to the cited reports, since the 1970s, temperatures have been increasing, with the decade of the1990’s temperatures being as warm as the peaks in the 1920s and 30s. Annual rainfall trends show very strong increases of 20-30% or more over the past 100 years across Mississippi, Arkansas, South Carolina, Tennessee, Alabama, and parts of Louisiana, with mixed changes across most of the remaining area. There has been a strong tendency for more wet periods in the Gulf Coast states, and a moderate tendency in most other areas. Obviously, not all of these changes are due to human intervention. Changes in climate, by definition, occur over long periods of time, discounting year-to-year variations.
The cited report also summarizes that the Southeast is prone to frequent natural weather disasters that affect human life and property. Over half of the nation's costliest weather-related disasters of the past 20 years have occurred in the Southeast, costing the region over $85 billion in damages, mostly associated with floods and hurricanes. Across the region, intense precipitation events have increased over the past 100 years and this trend is projected to continue. The southern heat wave and drought of 1998 resulted in damages in excess of $6 billion and at least 200 deaths, not to imply that it was the result of or only the result of climate change from global warming.
Human health concerns arise from projected increases in maximum temperatures and heat index in the region. These concerns are particularly great for lower income households that lack sufficient resources to improve insulation and install and operate air conditioning systems. Air quality degradation in urban areas is also a concern associated with elevated air temperatures and increased emissions from power generation, which can increase ground-level ozone. The higher the temperatures, the more air conditioning that is used, further aggravating the situation. Increased flooding in low-lying coastal counties is also likely to adversely impact human health. Floods are the leading cause of death from natural disasters in the region and nationwide.
North Carolina Climate and Perspectives
The State Climate Office at North Carolina State University has studied changes in the state, and in DAQ’s April 2004 workshop session, information was provided indicating that they have concluded that changes do occur that are due to human intervention and activities.29 Even surface reflectivity modification activities such as paving of highways and parking lots cause changes in atmospheric temperature, as do changes in crops and the vegetative cover from agriculture and forestry practices. Actions all over the globe impactson the climate in North Carolina. Conversely, actions in North Carolina similarly
28 Ezra Millstein, The Potential Impacts of Global Warming on the Southeast, World Wildlife Fund, from the First National Assessment of the Potential Consequences of Climate Variability and Change, http://www.climatehotmap.org/impacts/florida.html
29 Bryan Boyles, Presentation to DAQ Mercury & CO2 Workshop, April 19, 2004, Raleigh, NC (See Appendix A).
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contribute to changes around the world. Very little association between real time changes in North Carolina emissions will be reflected in immediate and traceable change in the state, and little changes relative to the whole problem in the global sense. A 100+-year plot of temperatures in North Carolina from the National Climatic Center database (Asheville, NC) is shown in Figure II-8, showing a trend upward in recent years. Equally important are land use patterns, development, urbanization and changes in GHG.
Figure II-8
Statewide Average Temperature for North Carolina (1885-2004)
Source National Weather Records Center30
Implementing the CSA will result in reductions in sulfur dioxide (SO2), and thus, the reduction of atmospheric sulfates. These sulfates result in formation of small particles in the air that also contribute to the greenhouse effect. As the CSA-required scrubbers are put on line and the reductions in SO2 occur, the greenhouse effect is expected to be reduced somewhat by this effect. It is not possible to make this relationship quantitative, however.
The State Climate Office also indicates that there are good science reasons for North Carolina to begin to make reductions in GHG, including CO2, and that it should start now.31 The known science is represented through models, but the models are not sufficiently refined to be able to reflect all situations. However, the evidence and associations are strong. On the other hand, models and records allow for tracking of global changes over the past several years. These models don’t make reliable predictions for the next 100 years, but can be accepted as directionally correct. They also do not do a
30 National Climatic Data Center, Climate at a Glance, North Carolina, http://climvis.ncdc.noaa.gov/cgi-bin/cag3/hr-display3.pl.
31 Bryan Boyles, Presentation to DAQ Mercury & CO2 Workshop, April 19, 2004, Raleigh, NC (See Appendix A).
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good job on local patterns, but are better for global changes. Precision is not good but general changes are directionally good. The projected numbers will likely continue to change over the next several years and decades.
North Carolina will be most vulnerable in the coastal areas if projections come true. Other changes may occur if warming and climate changes cause a migration of the “sweet spot” for growing various crops and natural vegetation. Some researchers32 even project an increase in poison ivy, but again, this is speculation and not necessarily agreed to by all scientists and evidence.
If the global community does not reduce emissions of GHG significantly, some project that North Carolina will likely be left with a climate similar to that of central Florida,33 a dramatically different coastline due to sea-level rise and subsequent inundation34, an increased occurrence of heat-related asthma and death,35 and hundreds of millions of dollars in losses from severe weather events.36 However, it is argued that if sufficient reductions are implemented quickly, and globally, the costs associated with these impacts can be alleviated. At the same time, these actions can stimulate the State’s economy, according to some advocates. Innovative, business-oriented policies that create a market for GHG, or equipment for their reduction will potentially align environmental goals with business goals and generate revenue is a strong argument for action.
32 William H. Schlesinger, Duke University, Nicholas School of Environment and Earth Sciences, Panel Presentation at the May 2004 NC Climate Education Partnership.
33 Ibid.
34 Union of Concerned Scientists, Impacts of Climate Change in the US, October 2003, http://www.climatehotmap.org/impacts/florida.html. .
35 Physicians for Social Responsibility, “Death By Degrees: The Health Impacts of Climate Change in North Carolina,” March 2001.
36 National Weather Service, Office of Climate, Water, and Weather Services, “State Summary Statistics 2003.”
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CHAPTER III IMPACTS AND ECONOMICS OF CLIMATE CHANGE
It is not possible to provide an original, complete, authoritative discussion and analysis of all physical and economic impacts for North Carolina within the confines and limitations of this report and the information available. However, some general tendencies and observations can be made. That is the purpose and intent of this chapter.
A Backdrop of Growth in Southeastern States
The Southeast "sunbelt" continues to be a rapidly growing region with population increasing by more than 30 percent between 1970 and 1990. Much of this growth occurred in coastal counties with expectation that this growth will continue for the several years. The number of farms in the region decreased 80 percent between 1930 and 1997, but still produces roughly one quarter of US agricultural crops. The Southeast has become America’s "wood basket," producing about half of America’s timber supplies. The region also produces a large portion of the nation’s fish, poultry, tobacco, oil, coal and natural gas. Prior to European settlement, the landscape was primarily forests, grasslands, and wetlands, but by 1920, most of the native forests were converted to managed forests and agricultural lands. Although much of the landscape has been altered, a wide range of ecosystem types exist and overall species diversity is high.37
Projected Climate Change Impacts
The United Nation’s Intergovernmental Panel on Climate Change (IPCC) projects that, because of elevated concentrations of GHG in the atmosphere, the rate of sea level rise for the next 100 years is likely to be at least double the rate that we have experienced over the last century. The IPCC estimates that sea levels in the Atlantic Ocean are likely to rise 19 inches by 2100, and could rise by as much as 36 inches in the same period if GHG emissions go unchecked. If these projections are experienced, by 2030, there could be a 10-inch sea level rise along the North Carolina coast. The effects of potential further melting of the Greenland and Antarctic ice sheets are not included in these scenarios. Recent research suggests that this melting could have a faster and even more serious impact on sea-level rise than previously thought.38, , 3940Of course, not all scientists are in agreement with these conclusions or projections, but the consensus continues to grow.
Tools such as climate models are often used to integrate the complex interactions and effects to provide a basis for conclusions. Such climate model projections exhibit a wide range of plausible scenarios for both temperature and precipitation over the next century. Two commonly used models are the Hadley Model and the Canadian model.41 Results of such models, though often challenged, are generally accepted as the best available basis for
37 Ezra Millstein, The Potential Impacts of Global Warming on the Southeast, World Wildlife Fund, from the First National Assessment of the Potential Consequences of Climate Variability and Change, http://www.climatehotmap.org/impacts/florida.html
38 H.J. Zwally, Abdalati, W., Herring, T., Larson, K., Saba, J., and Steffen, K., Surface melt induced acceleration of Greenland ice-sheet flow, Science- 297, 218-222, 2002.
39 J. Hansen, Defusing the global warming time bomb, Sci. Amer., 290, no. 3, 68-77, 2004.
40 Quirin Schiermeier,. A Rising Tide, Nature, 421, 114-115, 2004.
41 Ezra Millstein, The Potential Impacts of Global Warming on the Southeast, World Wildlife Fund, from the First National Assessment of the Potential Consequences of Climate Variability and Change, http://www.climatehotmap.org/impacts/florida.html .
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projections and have been endorsed by the National Academy of Science.42 Both of the principal climate models were used in the National Assessment project,43 and both indicated warming in the Southeast, but at different rates. The Canadian model shows the Southeast experiencing a high degree of warming, which further translates into lower soil moisture as higher temperatures increase evaporation. The Hadley model simulates less warming and a significant increase in precipitation (about 20 percent). Some models suggest that rainfall associated with El Niño and the intensity of droughts during La Niña phases will be intensified as atmospheric CO2 increases.
In addition to seal level rise, many areas along the North Carolina coast are believed to be sinking by about 7 inches per century. This means that some areas of coastal North Carolina may likely experience an accelerated rate of inundation, regardless of climate effects. A sea level rise (or sinking of the land mass) of less than 14 inches would likely inundate about 770 square miles of the North Carolina coast, an area nearly the size of Great Smoky Mountains National Park.44 The State’s coastal wetlands and other low-lying areas could be flooded, and the Albemarle and Pamlico sounds could become open waters. The North Carolina coastal areas are already some of the most vulnerable to extreme weather events in the U.S., and even low-intensity storms create billions of dollars in damage.45 The combined effects of rising seas and sinking lands could drastically change much of our coastline and barrier islands, increase vulnerability to storms, and put billions of dollars of coastal property at risk.
Assuming these projections are fulfilled, traditional approaches such as flood levees, elevated structures, and building codes, will not be adequate alone to prevent or even manage damage in the coastal zone as sea level rise would continue to increase the threat of storm-surge flooding in virtually all Southeastern coastal areas. Improvements in risk assessment, coastal and floodplain management, linkage of insurance to policies for mitigating flood damage, and local mitigation planning might help decrease potential economic impact. Changes in climate and sea-level must be integral parts of coastal communities develop strategies for hazard preparedness and mitigation. 46
Potential Economic Impacts Associated with Climate Inaction
Associating “real” economically defensible costs with any particular inaction is difficult and speculative at best. However, according to a report prepared for the United Nations Environment Program, “Worldwide economic losses due to natural disasters appear to be doubling every ten years, and have reached almost $1 trillion over the past 15 years. If current trends persist, the annual loss amounts as estimated by UNEP, will come close to US $150
42 Climate Change Impacts on the United States: The Potential Consequences of Climate Variability and Change, A Report of the National Assessment Synthesis Team, U.S. Global Change Research Program, www.usgcrp.gov/ .
43 U.S. Global Change Research Program , Climate Change Impacts on the United States: The Potential Consequences of Climate Variability and Change, A Report of the National Assessment Synthesis Team, www.usgcrp.gov/.
44 Ben Poulter, Duke University, and Sam Pearsall, The Nature Conservancy, 2003.
45.H. Levinson and Waple, A.M, State of the Climate in 2003, Bulletin of the American Meteorological Society Vol. 85, No. 6 June 2004.
D46 , U.S. Global Change Research Program, Climate Change Impacts on the United States: The Potential Consequences of Climate Variability and Change, A, Report of the National Assessment Synthesis Team, www.gcrio.org/NationalAssessment/.
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billion within the next decade.47 North Carolina’s share of this estimate would also be difficult to assess. However, according to one report, in 2002, North Carolina experienced more than $678 million in weather-related losses and government expenditures.48 This is not to imply a direct relationship with climate change, but there is certainly an expected connection.
Tourism has definite potential for economic impacts if the climate projections hold true, especially with regard to a rising sea level. In 2001, tourism in North Carolina’s 20 coastal counties generated an economic impact of nearly $1.8 billion. Accelerated sea-level rise would threaten this revenue and billions of dollars worth of property.49 The costs of health, agriculture and other related costs would likewise be large.
However, there are also potential benefits and opportunities associated with development of renewable energies, improvements in energy efficiency and related technologies in the state. According to California studies, renewable energy development can generate even more jobs than fossil fuel-based energy production on a common basis of megawatt delivered.50
Nothing affects the business climate of a company as much as making a profit, or not. That is a basic reason why the company exists and is in business. If the environmental, such as greenhouse mitigation, effort generate additional income, this tends to get the attention of the management of the company and is likely to lead to further rewarding experiences.
Weather-related Stresses on Human Populations
The US experienced 42 weather-related disasters over the past 20 years that resulted in extensive damage and costs in excess of $1 billion each; 23 of these occurred in the Southeast, mostly in the form of floods and hurricanes. Projected sea-level rise could increase the risk from flooding to low-lying coastal counties from the Carolinas to Texas, which could adversely impact human health, threaten lives and cause extensive economic damage. Heat waves also take their toll; the southern drought of 1998 resulted in damages in excess of $6 billion. The same year, a combination of an unusually wet winter, dry summer and high heat led to wildfires in Florida that burned roughly 500,000 acres of land. Heat waves increase the risks of heat related illness and mortality and increase ozone production affecting primarily the elderly, the young and those who are already suffering from respiratory or other illnesses. While these are natural occurrences, climate induced changes to them can likely increase similar effects.51 Such increases cause individuals to experience increased economic loss, increased stress from concern and worry over their physical plight and subsequent or related economic security.
47 Climate Change and the Financial Services Industry: Module 1 – Threats and Opportunities, United Nations Environmental Program and Innovest, http://www.innovestgroup.com/.
48 Beth Lander, The Costs of Inaction, US PIRG Education Fund, 2003.
49 The Coastal Zone Management Act in North Carolina, National Oceanic and Atmospheric Administration, US Department of Commerce, 2003.
50 Karen Rindge, Renewable Energy: Good for NC’s Economy, Carolina Sun, Summer, 2004
51 Ezra Millstein, The Potential Impacts of Global Warming on the Southeast, World Wildlife Fund, from the First National Assessment of the Potential Consequences of Climate Variability and Change, http://www.climatehotmap.org/impacts/florida.html.
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Climate Change Effects Projected for Southeastern Forests
Evidence from long term monitoring indicates that climate change would likely affect individual growth rates directly by way of overall warming or change in regional moisture balance. Information presented at DAQ’s April 2004 Workshop indicates an increased growth rate in trees and other vegetation will occur due to such changes.52 Climate shifts will also likely affect tree mortality and recruitment rates by altering the frequency and intensity of stand disturbances. Results suggest that disturbance effects are stronger and quicker than growth effects. Because individual trees grow quickly and the species involved are not particularly long-lived, responses to climatic change could be relatively rapid. In natural area preserves, Chinese tallowtree and other non-native woody species (including poison ivy) may become more important if disturbances increase. In commercially managed forests, increasing disturbance rates may result in higher timber losses.
The variety of spatial and temporal influences on forest processes, coupled with uncertainties associated with climate prediction, makes difficult the assessment of the effects of changes in climate on forest dynamics at the ecosystem level. Nevertheless, research at Rice University not only identifies specific climatic effects on particular life stages or processes, but it also provides critical information for improving our understanding of the context within which these effects are likely to occur.53
Background on Emissions Trading Programs
In the last two decades, emissions’ trading has emerged as a favorable policy mechanism to reduce air pollution. This market-based approach can often cost-effectively reduce selected air pollutants by allowing businesses to buy, trade and sell their “rights to emit” specific pollutants. If companies reduce their emissions below the limits set by government caps, they can sell their surplus reductions to companies who face higher on-site reduction costs. Businesses are thus given financial incentive to reduce emissions, under an overall umbrella of region-wide reduction totals. Such a trading market system already exists for sulfur dioxide (SO2) and nitrogen oxides (NOx) under the federal Clean Air Act’s Acid Rain Program.54 CO2, being a gas, readily mixes globally. A CO2 molecule emitted anywhere has an effect on climate everywhere. This makes CO2 an ideal candidate for national and state emissions trading within a scale of an international market place. A national carbon market, which will require national carbon caps, provides a promise to stimulate innovation in the private sector and enable society to make reductions in more cost-effective ways.
Options exist to use the current “lead time” before the caps are established, to begin preparing for such a national and international global carbon marketplace through pilot programs and
52 William H. Schlesinger, The Global Carbon Cycle and the Duke Forest Free-Air CO2 Enrichment (FACE) Project, Duke University, Nicholas School of Environment and Earth Sciences, Presentation to DAQ Mercury & CO2 Workshop, Raleigh, NC; April 21, 2004 (See Appendix A).
53 Paul A. Harcombe, Rice University, Department of Ecology and Evolutionary Biology, Effects of Climate Change on Southeastern Forest, USGS http://www.nwrc.gov.
54 U.S. EPA, Acid Rain Program Web Page, http://www.epa.gov/airmarkets/arp/ , August 2004. III-4
other means. Many sectors throughout the state will then more likely have opportunities and motivation to develop greater and more incentives for reducing their greenhouse gas emissions in a more timely fashion.
The Currency of a Carbon Market: Carbon Credit$
The tradable commodity in a carbon marketplace is CO2 equivalents (tons) or “carbon credits.” These carbon credits may be earned by companies and landowners who reduce CO2 and other greenhouse gas pollutants like methane. Credits can be earned by reducing greenhouse gas emissions directly. Under some scenarios, opportunities to earn credits may also occur through activities that indirectly reduce greenhouse gas pollution, such as renewable energy development or carbon sequestration in forests.
Supply and demand drives the marketplace. To function efficiently, a carbon market needs buyers and sellers. Currently, in North Carolina, many sectors have the potential to supply carbon credits. Possible suppliers include:
• Swine industry: for converting waste and reducing methane for fuel.
• Forestry industry: for sequestering carbon by reducing deforestation and by increasing reforestation projects for both sequestration and for renewable energy.
• Reforestation of agricultural land:
o Planting agricultural land to trees where tobacco farmers previously grew tobacco and tobacco production is expected to be discontinued, and
o Tree planting on agricultural lands that were former wetlands converted to agriculture prior to 1976, to create “new” wetlands for Wetland Mitigation Banking or mitigation credit.
• Agriculture industry for sequestering carbon and reducing energy use through no-till farming.
• Renewable energy industry for providing lower GHG impact energy.
• Manufacturers and utilities: for voluntarily decreasing direct emissions of CO2 before implementation of mandated caps.
• Other Corporations (e.g., universities and business establishments, etc.): for voluntarily decreasing emissions through new energy-efficient building designs and transportation innovations.
Because North Carolina does not have a CO2 cap, there is no current demand within the state for carbon credits. North Carolina could potentially create an economic engine for the State by implementing GHG emission reductions and establishing a carbon marketplace. Several organizations already exist that could help our State track its carbon credits and trading activity. Preparing North Carolina for the emerging carbon markets could be made possible through one of several policy options to avoid losing any such revenues to other states. Many agree that a national cap on CO2 emissions is necessary and forthcoming.
As national carbon caps are established, North Carolina will likely need to anticipate and be prepared for the related economic opportunities. Carbon caps will undoubtedly bring a national carbon marketplace, characterized by buying and selling of carbon equivalence
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credits. North Carolina should further evaluate the steps required to take advantage of such carbon market and implement evolved policies that prepare our utility, swine, forestry, agriculture and other industries, to sell carbon credits for their emissions reductions or for sequestering carbon in trees and soil. The emergence of new technologies to reduce greenhouse gas emissions from power plants, confined animal feeding operations, and other emission sources presents potential opportunities for North Carolina. By developing and evaluating ways for providing incentives for the use of such innovative technologies, we can potentially reduce our state’s greenhouse gas emissions while addressing other environmental problems and even creating jobs.
In addition to capitalizing on economic opportunities, many feel that our state’s top decision-makers need to be evaluating mitigation scenarios and planning how to minimize potential climate change threats (such as coastal inundation, lost agricultural revenue and human health issues). In light of the global and national pressures for action, and because of the threats climate change poses to our state, many feel that North Carolina needs to prepare its economy and its people for a carbon-constrained world.
Potential Cost Scenarios
The DAQ workshop in April 2004 (See Appendix A) provided a beginning level of cost analysis of efforts to reduce CO2, from different viewpoints. Dr. Anne Smith’s presentation55 represented such analyses for both mercury and CO2 measures from an industry perspective. Related discussions reflected broad reactions and variant perspectives one would expect from this type of analysis, from both environmental and industry sectors. The industry perspective is primarily that economic impacts of North Carolina attempting to address CO2 unilaterally would be significant and negative arguing that the State needs to await federal action on CO2, and the environmental advocates perspective is that action needs to begin now and will provide significant economic return and “reimbursements.”
Some of Dr. Smith’s main points were:
• CO2 comes from coal, oil and natural gas generation, but coal emits roughly 2x more CO2 per kwh than natural gas.
• Retrofit controls are the most costly control option with a switch from coal to gas costing about $30-50/ton C for first few %; switching from coal to renewables costing about $100/ton C for first few %; and removal of CO2 from stack costing about $300/ton C (large reductions).
• On-system controls are expensive even for new generation. For example, she believes that building IGCC with C-sequestration would cost about $100/ton C, with large reductions possible, but likely with decades of lead-time.
• Fuel Switches, according to the analysis, would have various effects and considerations:
55 Dr. Anne Smith, Charles Rivers Associates, Washington, D.C., Insights on Economic Impacts of Utility Mercury and CO2 Controls, Presentation at NC Division of Air Quality Mercury and CO2 Workshop, April 20, 2004, Raleigh, NC. (See Appendix A). III-6
o Coal-to-Gas: A 20% reduction in current coal MWh would require: 1) a 50% increase in current gas generation, 2) more new gas plants to be built, 3) drive natural gas prices up (affecting other industry), and would reduce national CO2 emissions <3%,
o Coal-to-Renewables: A 10% reduction in current coal MWh would require >5-fold increase in renewable capacity, to reduce national CO2 emissions <3%, and
o Both would drive $/ton higher than the estimates above for “first few %” of reductions, and would require a multi-decade approach with on-system reductions costing less than $100/tonne C.
Other “off-line” changes may be more achievable she surmised: such as changes in land use practices, changes in forestry practices, energy demand-reduction projects, and projects in other countries that reduce their CO2 baseline (a trading option). The presentation concluded that the costs would be much cheaper (